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Consolidating Credit Card Debt 101: Pros, Cons, And Everything You Want To Know

Consolidating Credit Card Debt 101: Pros, Cons, And Everything You Want To Know

What are the pros and cons of consolidating credit card debt?

This is a good question. With the recent economic situation in America, many people have been unemployed and are struggling to make minimum payments on their credit card debts. As a result, they have accumulated a lot of credit card debt that they no longer can afford to pay. Consolidation allows them to combine all their debt into one low monthly payment with a much lower interest rate.

what are the pros and cons of consolidating credit card debt

There are some cons associated with this process as well. If you find yourself in a situation where you need to start consolidating credit card debt for bad credit, be sure that you do some research on your options.

Finding a good consolidation company

Some consolidation companies charge very high fees and interest rates and do not provide a lot of flexibility or choices when it comes to repayment programs. Other companies will give you a low interest rate, but it might not be enough to cover what you owe.

When you work with a consolidation company, make sure that you fully understand all of their terms and conditions. Make sure that you understand how much of your monthly payment goes towards your principal debt and how much goes towards interest. Do not sign any document if you do not completely understand what is required. If you are going through a serious financial crisis and are struggling to make even minimal payments, you should seriously consider going with a consolidation company.

Once you decide on a consolidation company, you may wish to also work with a credit counselor to help you get your finances back under control. They can be quite helpful in discussing your credit card bills and working out a plan to lower your monthly payments and eliminate up to 30% of your total debt. Using a credit counseling service is often a good alternative to having to file bankruptcy. They can also give you advice on how to avoid future credit card problems and keep your overall debt as low as possible.

Debt consolidation for low credit score

It is important to understand that there are options available to those with low credit scores. Consolidation companies do not always offer the best rates. In fact, some credit card companies actually encourage customers to consolidate their debt because it reduces their risk of defaulting.Credit Card Escape

That means that they will receive less money if they have to repay a debt. Also, keep in mind that this is only an option for those who can truly afford to pay off their debts without assistance. For people in this situation, consolidation is not the best option.

Balance transfers with low interest credit cards

The best low interest credit cards for balance transfers that are available to consumers are from one of the new entrant’s to the consolidation business. These companies usually charge reasonable rates and some have no minimum monthly payment. They also offer the convenience of one low interest rate with multiple flexible repayment schedules and payment plans. This makes it easier for people to pay their balances off and rebuild their credit scores.

To find the best low interest credit cards for balance transfers, try and get at least three consolidation quotes before making your decision. Do not take the first offer that you are given. Make sure you compare the different offers because rates and fees vary widely between companies.

Look for a company that has been in business for a while and has good, solid statistics. A long-term history of helping people consolidate their debts can go along way in determining which company you wish to work with. The longer the consolidation company has been around, the better.

When you have found the right consolidation company and are working with them, make sure you follow through with your plan to pay off your debt. If you do not follow through, you may find yourself in deep trouble again. Remember, if you do not stay current on your payments the companies are not obligated to offer you more credit. Stay current with all your payments and your credit will be back on the right track in no time at all.

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4 Best Ways To Do Debt Consolidation And Reduce Your Debt Payments

4 Best Ways To Do Debt Consolidation And Reduce Your Debt Payments

Is it better to consolidate credit card debt yourself or seek the services of a debt consolidation company? Learn how to reduce your monthly debt payments.

Advantages of Debt Consolidation

The advantages? Debt consolidation firms argue that borrowing cash at a better interest rate than to pay debts off with your own credit card at a better interest rate can save you money over the long term, or save you money in the short term by helping you better manage your finances. Other advantages include: having fewer late payments, having more affordable monthly payments, and fewer chances that you will be late on a payment.

Disadvantages of Debt Consolidation

Does debt consolidation loans have disadvantages? Consolidation loans come with a variety of disadvantages. The main disadvantage is that the longer you go with high monthly payments, the greater your chance of defaulting. This can be a substantial loss to your credit score, which may affect future purchases. Consolidation loans are typically not meant to last forever because they often have an early pay out penalties.

can you consolidate credit card debt

How to Reduce Monthly Debt Payments

What are the best ways to lower your monthly payments while still paying off your debts?

  • Get a Debt Consolidation Loan

One of the best options is to get a debt consolidation loan from a debt settlement firm. Debt settlement firms can help

you settle your credit card debt for a fraction of the current amount owed. Because unsecured loans carry variable rates of interest, the amount that they settle for is also variable. It is a balancing act between satisfying the customer and getting enough money settled so as not to default. To do this, many firms will negotiate with creditors on behalf of their customers.

  • Bankruptcy Process

Another option is a bankruptcy process. A bankruptcy can wipe out a large portion of your debt relief potential but it is important to realize that this route is very time consuming and expensive. For most people, a much better way to debt consolidationget debt relief is to use the help of a debt settlement firm in a bankruptcy or debt relief plan rather than file for bankruptcy.

  • Refinance Your Mortgage

A third option is debt consolidation through a refinance of your mortgage. Many people cannot qualify for a refinance on their own. Banks usually require at least some equity to qualify. Using a refinance can lower your monthly payments but it can also increase your interest rate. It is best to find a mortgage broker to help you find a mortgage that offers the best deal.

You may also be able to lower your payments by working with your creditors. Some lenders offer incentive programs for people who can consolidate their credit card balances into one account. These programs are designed to help those with multiple accounts work with their lenders to lower their interest rates. This allows you to payoff all of your debts at once which will save you a lot of time and money. Most lenders will approve a debt consolidation loan, but they will charge a high interest rate as well.

  • Debt Management Plan

There are also companies that offer debt management plans to those who are unable or unwilling to consolidate. These plans allow you to transfer balances between several credit cards to a debt consolidation company that will pay them off for you. You can use the savings from the new company to make extra payments and lower your overall debt balance. This can reduce the stress of having to manage several debts but it can take several years to work through all of your accounts.

No matter what option you choose you should know that the best way to settle your current obligations is to contact your credit cards companies and negotiate a settlement. With each creditor you owe money, there is a process that must be followed to settle the account. It is best to hire an attorney so that they can give you the best advice possible. It may cost a little bit of money but the alternative to using debt settlement is bankruptcy and you do not want to ruin your credit rating or end up in jail.