California residents struggle with debt as much as, if not more than, the residents of any other state in the union. Consumers here, burdened by excessive amounts of debt, were having a difficult time keeping up before the recent surge in inflation. Things are getting even worse now.
If you are one of the many California residents that is desperate for some type of debt relief, the first step you can take in a positive direction is to get a complete understanding of how the rules and regulations that are specific to California might impact your unique situation.
Statute of Limitations on Debt in California
The statute of limitations for a debt varies dramatically from state to state, and California is known for having one of the most consumer-friendly approaches to debt-related legislation.
Here in the Golden State, the statute of limitations for the average debt is only four years. The statute of limitations for oral debt contracts is even shorter at two years. The only exception is that any state tax debts will have a statute of limitations of 20 years.
California also requires that commercial debt collectors provide an honest answer when a consumer asks if the debt they are attempting to collect is already past the statute of limitations. Those same consumers will need to be careful not to reactivate an old obligation and restart the statute of limitations clock, which resets anytime a payment is made on an old debt.
California Payday Lending Laws
California is also home to some stringent payday lending laws, which attempt to eliminate those lending companies’ ability to take advantage of struggling consumers.
Payday loans are a sticky trap for consumers to fall into, but legislation here in California sets a maximum payday loan amount to $300. Those same laws also specify that a payday loan has a maximum term of 31 days and a maximum interest rate of 15% or $45.
In addition to those basic rules, California also requires that payday loan lenders inform borrowers of the total fee amounts they agree to and any potential charges that might apply. Lenders are also not permitted to accept any collateral for the loans and are strictly forbidden from making a secondary loan if a primary payday loan already exists.
On top of all that, payday lenders must be licensed by the state of California to conduct their business.
Tips to Tackle Debt in California
If you are a California resident looking to tackle your debt problem here in 2022, there are several great resources you will want to implement to help you walk down that path.
The first step for most consumers looking to address their debt concerns is to consolidate their debts into a single balance. As long as you aren’t taking on any more debt, this can be an excellent way to simplify the situation.
California consumers can also use credit card balance transfers to move some of their higher interest credit card balances to new cards with no interest for a specific time. This can make a dramatic difference in the time it takes to pay down those debts.
Another standard tip for tackling debt in California is to take advantage of skyrocketing real estate prices by doing a cash-out refinance on your home mortgage. This is an excellent tool to move high-interest debt into your low-interest home mortgage, but you must remember that it will increase your mortgage payment significantly, so it is not the free money that many so-called experts make it out to be.
No matter where you find yourself financially, getting rid of debt is always an excellent way to create a positive change in your life. Get started today, and make sure that you are taking advantage of all the laws that California has working in your favor when you do.
