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Best Places to Pay Down Debt

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A new year means new beginnings, but it’s hard to make a fresh start with debt saddling you down. You could take out a personal loan to help consolidate your debt and pay it down faster — or you could consider a change of scenery. Depending on where you live, some places in the U.S. are harder spots to be frugal, no matter how much you budget and trim expenses.

To find the best and worst places to pay down debt, LendingTree researchers looked at five metrics — including average credit utilization rate, median rent as a percentage of household income and regional price parity, among others — across the 100 largest U.S. metros by population.

Key findings

  • North Carolina metros are the best places to pay down debt. This Southern state has three metros in the top 10: Raleigh (No. 1), Durham (No. 4) and Winston-Salem (No. 6). Charlotte (No. 15) is just outside the top 10.
  • Despite North Carolina’s dominance, the Midwest has more representation in the top 10 than the South. Six Midwest metros in Nebraska, Wisconsin, Indiana, Iowa and Missouri join the top 10, more than the four Southern metros in North Carolina and South Carolina.
  • Honolulu is the worst place to pay down debt. Regional prices for goods and services in the capital of Hawaii’s metro area are, on average, costlier than nearly all 100 of the largest metros — except for New York; San Jose, Calif.; and San Francisco.
  • California is a tough place to live if you want to pay down debt. Five of the 10 worst places to pay down debt are in the Golden State: Riverside, Los Angeles, Stockton, Fresno and Bakersfield.

Want to pay down debt quicker? Head to the Tar Heel State … but keep the Midwest in mind

If you’re looking to pay off your debt quicker, you might want to head to North Carolina — the Tar Heel State. Raleigh is the best place to pay down debt, one of three in North Carolina among the top 10 places in the LendingTree rankings. In addition to the state’s capital, Durham and Winston-Salem are also in the top 10, with Charlotte coming in just behind at No. 15.

The North Carolina metros within the top 10 are there because of a combination of factors:

  • Rent as a percentage of median household income is below 20% in Raleigh, Durham and Winston-Salem — with Raleigh’s being the lowest at 17.2%. That’s more than two percentage points lower than the 19.5% average across the 100 metros analyzed. With lower monthly housing costs, North Carolinians likely have more money to devote to debt payments.
  • The price of goods and services in each of the North Carolina metros is below the national average.
  • The state of North Carolina prohibits debt collectors from garnishing your wages if you’re supporting a family. This means that all North Carolina metros earned an A grade from the National Consumer Law Center for wage protection.

Why housing cost matters

“The less money you have to pay for your home each month, the more money you have to pay down debt, build up emergency savings and generally strengthen your financial situation,” says LendingTree chief credit analyst Matt Schulz.

The North Carolina metros each have a relatively low credit utilization ratio, which is the amount of debt you have compared to your total credit limit. (Winston-Salem is the worst-rated of the three at 23.3%, but that’s similar to the 100-metro average of 23.1%.) This means that most North Carolinians aren’t maxing out their credit cards, so they might have more leftover each paycheck to pay off debt.

As an added plus, unemployment in North Carolina is quite low. (Again, Winston-Salem is the highest of the three North Carolina metros in the top 10 at 3.5% — though this is below the 100-metro average of 4.1%). This means that people are earning an income and able to pay debt, rather than accruing it.

Low cost of living makes the Midwest a great region, too

If you’re eager to pay down debt, the Midwest is another great place to consider. Six of the top 10 metros on our list are from the heartland — with Cincinnati (No. 11) and Minneapolis (No. 13) just outside.

Though none of the states representing the Midwest metros in the top 10 earn an A grade on wage protection, each shares common features of a low cost of living.

Top 10 places to pay down debt
Rank Metro Average credit utilization rate Unemployment rate Rent as a % of income Regional price parity Debt protection score
1 Raleigh, NC 19.4% 3.0% 17.2% 96.1 A
2 Greenville, SC 23.3% 2.7% 17.7% 90.7 A
3 Omaha, NE 20.9% 1.7% 16.2% 91.7 D
4 Durham, NC 18.3% 2.9% 19.6% 94.8 A
5 Milwaukee, WI 22.0% 2.8% 16.7% 94.6 B
6 Winston-Salem, NC 23.3% 3.5% 18.2% 88.7 A
7 Madison, WI 21.8% 1.8% 17.3% 96.4 B
8 Indianapolis, IN 20.2% 2.4% 17.9% 91.1 D
9 Des Moines, IA 21.6% 2.8% 15.9% 92.3 D
10 St. Louis, MO 21.8% 3.2% 16.0% 90.1 D

Rent as a percentage of median household income is even lower in some Midwestern metros at the top of our list than top-ranked Raleigh, N.C. The honor for the lowest percentage of rent as monthly income within the top 10 goes to Des Moines, Iowa, at 15.9%, closely followed by St. Louis at 16.0%.

Other factors make America’s heartland an ideal region to pay off debt: Among all the Midwest metros in the top 10, the prices of goods and services are lower than the national average. And in most metros, unemployment is below 3.0% — with Omaha, Neb., and Madison, Wis., having rates as low as 1.7% and 1.8%, respectively.

“Low cost of living and relatively low unemployment is a pretty great mix,” Schulz says. “That’s what we’re seeing in many of these places that rank so well on this list.”

It’s more difficult to pay down debt in the Golden State

At the other end of the spectrum, five metros from California — the Golden State — make it a tough place to live if you want to pay down debt.

Among the California metros ranked at the bottom, the cost of goods and services exceeds the national average in three of the five locations, although Fresno and Bakersfield are both just about in line with the national average.

In contrast to the North Carolina and Midwest metros at the top of our rankings, this means that your dollar won’t stretch quite as much there. It might be the home state of the Gold Rush, but California can be a tough place to get ahead if you’re struggling to manage debt.

Bottom 10 places to pay down debt
Rank Metro Average credit utilization rate Unemployment rate Rent as a % of income Regional price parity Debt protection score
1 Honolulu, HI 21.4% 5.4% 24.3% 123.8 D
2 New York, NY 23.4% 6.3% 21.4% 125.7 C
3 New Orleans, LA 29.1% 5.1% 21.2% 93.1 F
4 Riverside, CA 24.8% 6.3% 23.9% 107.3 B
5 Los Angeles, CA 22.3% 7.1% 25.5% 118.8 B
6 Stockton, CA 25.9% 7.2% 21.9% 102.2 B
7 Las Vegas, NV 24.2% 6.6% 22.9% 96.9 C
8 Fresno, CA 26.4% 7.6% 21.6% 97.5 B
9 Bakersfield, CA 27.0% 8.3% 21.5% 97 B
10 New Haven, CT 28.6% 5.0% 19.8% 106.2 B

In addition to the California metros, the bottom 10 metros to pay down debt are rounded out by the following metros: Honolulu, New York, New Orleans, Las Vegas and New Haven, Conn. Though they aren’t confined to any single region of the country, many of these metros share a higher cost of living —in fact, the price of goods and services is higher than the national average in six of the 10 metros.

Plus, nearly all the bottom 10 metros devote more than 20% of income each month to rent, with Angelenos sending a quarter of their paychecks on average to pay for housing. Along with higher unemployment rates and comparatively high credit utilization ratios, these factors combine to make it more difficult to tackle your debt.

“When you live in these incredibly expensive cities, it’s hard to put money away in savings, and when you can’t save, it’s tough to ever really escape debt,” Schulz says. “That’s because if you don’t have any savings, any unexpected expense — such as a car repair or a medical issue — often just goes right on to that credit card that you just paid off. That keeps the cycle of debt spinning, and it’s very hard to stop.”

Full rankings

6 tips to pay down debt no matter where you live

Regardless of where in the country you live, there are strategies you can follow if you’ve made a New Year’s resolution to pay down your debt.

Create a zero-based budget

One of the best ways to start tackling your debt is by making a budget to help you track your spending. There are several types of budgets, but a zero-based budget is a great tool for debt management, since this type of budget accounts for every dollar earned. When you assign every dollar a job, it’s easier to see where to devote money toward debt payoff.

Utilize debt avalanche method

For this method, When you begin to manage your debts, make a list of your debts from the one with the highest interest rate to the one with the lowest. By using the debt avalanche method, you’d pay off your highest interest debts first, allowing you to pay the least interest over time.

Utilize debt snowball method

Sometimes the highest interest debts also are some of the largest balances, which may make it seem like it will take forever to pay off all your debt. If this sounds like you, try the debt snowball method. List your debts in order from smallest to largest, then work to pay off your smallest debt first. This method helps to give you smaller wins along the way toward your debt-free journey.

Consolidate debt with a personal loan or balance transfer

Debt consolidation could help save you from paying a lot of interest. This method combines multiple forms of debt, such as credit cards, into one personal loan. Not only do you have one monthly payment, but you may also have a lower interest rate.

“Since you’re basically turning revolving debt into installment debt, it no longer counts toward your utilization rate and can make a big difference,” Schulz says. “Of course, that doesn’t make it any less important to pay down that debt as soon as possible.”

Another option could be a balance transfer to a credit card that offers a low or 0% introductory APR. Because the low or no APR is often only available for an introductory period — commonly 12 to 15 months — this option only makes sense if you’re able to pay off the debt within the initial window.

Devote any excess windfalls to debt payments

If you’re about to get a tax refund when you file, you’ve received an end-of-year bonus or you’re sitting on a pile of cash from the holidays, use it to make an extra debt payment.

Create a repayment plan or negotiate a debt settlement with your creditors

If you’ve made a budget and are still struggling to repay your debts, talk to your creditors and explain your situation. Maybe they’ll agree to a lower monthly payment plan or settle for less debt than is what’s owed.

Keep credit utilization low

“Utilization is the second most important factor in FICO credit scoring formulas, so it matters a lot,” Schulz says. “The good news is that there are several ways that you can improve it. The best way is to knock down your balances. Keeping balances as low as possible should always be your primary goal with your credit card.”

Methodology

Researchers compared five metrics across the 100 largest metropolitan statistical areas (“MSAs”) in the United States.

  • Average credit utilization rate — how much credit people are using compared to how much they have available. This was calculated from a December 2020 sample of more than 1 million anonymized credit reports of LendingTree users.
  • Unemployment rate. October 2021 data is from the U.S. Bureau of Labor Statistics.
  • Median rent as a percentage of median household income — the median rent divided by median household income. Data is from the 2019 U.S. Census Bureau American Community Survey, one-year estimates.
  • Regional price parity — the price of goods in services compared to the national average. 2019 data is from the U.S. Bureau of Economic Analysis.
  • Debt protection scores — how states protect wages from debt collectors. 2019 data comes from the National Consumer Law Center. This is the only metric tracked at the state level rather than the metro level.

Each of these five metrics was given a value according to their relative location between the highest and lowest values. The values were then summed and divided by five for equal weight.

 

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