The Debt Consolidation Florida Disaster

Hurricanes are a perpetual financial disaster that has pummeled Floridians. In 1992, Hurricane Andrew caused Florida over $25 billion in damages. In 2004, Hurricane's Charley, Frances, Ivan, and Jeanne pummeled the state's economy with over $42 billion in damages. In 2005, Hurricane's Dennis, Katrina, Rita, and Wilma created for Florida the second costliest weather disaster in U.S. history. Yet, hurricanes have not been the primary cause of Floridian's debts.

Besides a low state minimum wage that does not support the cost of living in many Florida communities, unemployment has been a major culprit of Floridians' debt crisis. As a result, many debtors in Florida have sought debt consolidation loans to get financial relief. However, for some a debt consolidation Florida disaster has led to more money problems.

An issue with debt consolidation loan recipients is that the borrowers are required to dedicate the equity on their homes as collateral to guarantee loan repayment. The collateral is a security interest that ensures the lender of the loan is repaid if the borrower defaults on the loan payment.

People that have taken out debt consolidation loans in Florida have been targets of predatory lenders, which issued loans without any regard to a borrower's ability to pay. Lenders have notoriously offered these loans with a variable interest rate that eventually causes a substantial spike in a borrower's mortgage payment. Consequently, many borrowers in Florida that were hit with hundreds of dollars in increased mortgage payments were forced to default on their loans, succumbing to foreclosure.

Florida borrowers have also tricked by lenders into getting debt consolidation loans with hidden loan terms, high fees, and undisclosed insurance products. Victims of "loan flipping", a scheme that teases a borrower to apply for a loan with a low interest rate or the option to get cash out, were coaxed to repeatedly refinance their mortgages, enabling mortgage brokers to make huge profits from extra points and fees. The toll of the debt consolidation Florida disaster has created steep foreclosures. As of the third quarter in 2007, Florida had the next highest total of foreclosures - one foreclosure for every 95 households.

Considering the financial ramifications, people should try to avoid debt consolidation loans. A good debt consolidation alternative could be hiring a debt settlement professional. Unlike a home equity loan, this approach does not burden borrowers with the threat of foreclosure.

People in Florida, that have pursued the debt settlement option, consider it to be a great way to avoid bankruptcy and pay back a fraction of what they owed. Plus, debt settlement can be a practical way to improve cash flow and manage essential living expenses.

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