The abundance of credit provided to individuals in the 1990’s has created a climate of borrowers present day that are overleveraged, without proper cash flow and sinking jobs and careers.
There are many ways being advertised to get credit card debt help and relief, but many of them do not work or they provide temporary benefits, but long-term problems.
In the economic climate of today, there are many companies primarily debt consolidation firms that claim to provide services to aid their clients in credit card account debt relief. Here’s how debt consolidation works:
Debt consolidation agencies require clients to go 6-12 months without making payment on their debt. After this time period has elapsed, the agency will contact your creditors and negotiate your debt at a reduced rate. After a settlement has been negotiated, the client is required to make monthly payments to the debt consolidation agency. The amount you pay is based on your new negotiated debt, and is supposed to be less than the amount you would have been paying had you continued paying your monthly credit bills without the debt consolidation plan.
Here’s the problem with debt consolidation agencies:
In order for them to negotiate the lower rates, the debt consolidation agency requires you stop payments in order to leverage their ability to get you a reduced rate. Your creditors are willing to reduce the rate at this point because they are distressed in their attempt to collect your debt, and would much prefer to get something than nothing. The problem with this course of action is that during those 6-12 months you’re not paying your bills, your credit suffers. This can cause interest rates on your home and auto loans to increase, as well as auto insurance premium increases.
Debt consolidation is amongst the most popular route many people are mistakenly taking to fix their credit. As stated above the long-term negatives do not outweigh the short-term positives.
If you really want to get charge card debt help, you need to do one or all of the following:
Negotiate a lower annual percentage rate:
Negotiating a lower interest is one of the easiest and most over-looked options to charge card debt help and relief. If you’ve been responsible about making your monthly payments and have consistently been paying at least double or more of the minimum payment your credit card account company will more than likely be willing to negotiate a lower APR. There are many agencies that sell this service such as debt consolidation agencies, but they don’t tell you that you can do it on your own.
The primary benefit of a lower interest rate is that more of your monthly payment is applied to your principle balance as opposed to interest payments therefore allowing you to pay of your credit card account debt faster. If you have credit card debt in excess of $5,000, negotiating your APR is great because the savings in interest payment will become visible a lot faster due to the amount of your balance.
Balance transfer:
A balance transfer is not an option that is the most responsible, because your essentially “robbing Peter to pay Paul,” however it’s all about numbers. If your credit card account debt is high but your credit score is in the mid to upper 600’s you should be able to obtain more charge cards. If this is the case, a balance transfer is a great option for charge cards with high annual percentage rates.
For example, if you have a current charge card account with a 23% APR and you can get approved for a credit card account with a 10% fixed rate or 0% introductory rate, you could then do a balance transfer and transfer your high interest credit card account debt to your new low interest credit card account. You will see your principle balance drastically drop since more of your monthly payment is being applied to the principle.
Non-profit agency representation:
Non-profit agency representation is for individuals in circumstances who were legitimately taken advantage of by a creditor and they can provide proof in the terms and services of the creditors’ statements. This is a far stretch for most people and non-profits are very picky about who they represent since many of these cases do not get awarded in the debtors favor.
Michael Price has gone through the struggles of personal finance and has discovered solutions to many of the biggest problems that cause financial instability. Michael has published a guide to credit card debt help and personal finance. Checkout the guide at: chaoticonformity.com to get information and solutions to your financial wows.
Also, you can try talking to your bank. The best charge card companies to deal with in financial hardship situations are Discover credit cards and Chase cards.
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