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Debt Reduction Credit Card Consolidation

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Vivian Said:

What is the best budgeting or debt reduction tool?

We Answered:

The formula is simple ... spend less than you earn and avoid future debt. If you review your budget, you will see that after paying the consolidation program, you have a set amount available from your income. In order of importance, make sure to pay rent, utilities, car or transportation off the top. When you get to your disposable income, it's time to make wise choices about what you want versus what you need. Some people choose an envelope program in getting that disposable amount seperated into seven envelopes, one for each day of the week. With that amount of money, you now have to choose if you would rather have a $40 a month cell phone or 8 trips to McDonalds or a new pair of jeans or ???. It's your money so nobody can tell you how to spend (or not spend) it. The library has really good books that can help you reduce your expenses. One in particular is Mary Hunt's "Live your life for half the price." Your financial "diet" can be successful if you put your mind to it. Start today to track your spending and make sure what you buy is giving you value. Concentrate on needs rather than wants. You can need a new pair of jeans but they need not be $60 designer label ones. You may need a cup of coffee but it doesn't have to be from Starbucks. Cash will help you think of the work that went into the income rather than plastic. You've already seen how that can get you in trouble. You CAN do it. Are you psyched up enough???

Kathleen Said:

Does debt consolidation/reduction (for credit cards) hurt your credit as bad as bankruptcy?

We Answered:

The Credit Score (also known as your MyFico score) is calculated with the following breakdown:
* 35% - Payment History
* 30% - Credit to Debt Ratio
* 15% - Credit History
* 10% - New Credit
* 10% - Credit Types in Use
A small loan consolidation with low interest is the best (for credit cards)I found interesting information about your answer & options here. Goodhttp://all-debt-consolidation-loan.blogs… luck!

Gilbert Said:

debt consolidation?

We Answered:

Going through a debt management company will lower the APRs that you currently are carrying with each card. I can recommend CareOne because I've used them and I know that they're legal and won't take off your arm and leg. However, from experience, before you do, take the lowest amount card and not include it with the group. The reason for that is: once you use the debt management company, your card account are considered "closed" and you will not be able to use them, only pay them off through the debt management co. So, if you would still like to have some source of credit, keep one open and pay it off yourself. You can talk to the company and let them know what your situation is, and would they give you a lower rate. They may or may not give you one (let them know it's a hardship case: you cannot pay at a higher rate).

Then, you have to change your due dates on each of your cards to the end of the month: 30th is best. Choose a due date for CareOne at 13th, 14th or 15th. What happens is that they deduct the money from your checking account on say, 15th but the card companies won't get it until the 26th. They will lower the monthly payment (one lump sum) to an amount you can live with for the next 5 years.

Good luck and I know from experience, it can happen to anyone.

Matthew Said:

Credit Card Debt/Debt Consolidation Loan?

We Answered:

This is actually a pretty easy answer. If you can get a consolidation loan at a lower interest rate and can afford the payment, you should do it.

Otherwise, it really is a discipline issue. Any installment loan will have a fixed payment, but the payment would certainly be higher than the combined credit card minimum amounts. Therefore, there is nothing preventing you from paying the same amount (as the would-be installment loan payment) on the credit cards each month. Depending on the balances, most would say pay the higher interest rate first but there are benefits to paying off one completely first as well. The interest rates are close enough that I really don't think it matters where you put the extra money as long as the balances are coming down each month.

The only possible benefit to getting an installment loan at a higher rate than the cards would be to try and quickly improve your credit score. This is not a given depending on your credit file but in theory, reducing your credit card utilization should have a pretty big impact on your score. This is assuming your utilization is over 35% with current balances. Paying these off with an installment loan could improve your score more than the negative impact of opening a new account and taking an inquiry or two to get the installment loan. If you do not need the bump quickly, I would NOT get the installment loan unless the rate is lower. It doesn't make financial sense and there is not a 100% guarantee transferring the debt from cards to an installment loan will improve your score.

I cannot answer your question about whether or not you can get a debt consolidation loan at a lower rate or not. That depends on so many things like credit, income, and assets that you really need to speak to a banker. I would recommend a credit union in most cases.

The only other possible thing you can do is contact the credit card companies and ask for a concession on rates or fees. If you have not been late, this is unlikely but many card issuers are working with the card holder more and more to reduce the payments, fees and interest they pay in an effort to stave off delinquency and chargeoffs. This is less likely in your case because the cards are already at a pretty low rate.

Otherwise, there really is not much more you can do that makes sense. Just apply as much as you can to the card balances each month. Just "pretend" you have an installment loan and pay that much each month - the results are the same.
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Hope that helps, post back if need be- regards

Good luck!

Theodore Said:

Debt Solutions?

We Answered:

Sounds like you made lots of money during the real estate boom. Many people are going through what you are going through right now. Realistically, when you are in need of debt relief, you have about 4 options:

1. Try to increase your income somehow. Possibly by getting another job.

2. Get a debt consolidation loan. This will typically put you back in the same situation if you are not good with your finances since all that you are doing is transferring the debt amount from one loan to the next. Also, thats considering the fact that a bank would actually even lend you a 100k as a personal line/loan in today's market since the U.S. banking system is currently in a huge "credit crunch."

3. File for bankruptcy. This should be considered as the worst case scenario since it will be reported and may stay on your credit report for the next 7-10 years which will make it very difficult for you to apply for any kind of credit within that time.

4. A Debt Settlement/Solutions company's purpose is to negotiate with your creditors in an effort to reduce your debts by about half of what you owe and to get you out of debt in 2-3 years. Typically, your monthly payments would be cut down to about half as well. You are correct. This program will place a negative impact on your score, but you have to understand that there is no quick fix for this type of a situation. A good debt company would usually evaluate your situation, find out your financial hardship, qualify you and fully disclose to you the pros and cons of the program before it will allow you to join. This will educate you on how debt settlement works , so that you may decide on what's best for you.

Kay Said:

Can anyone explain to me how those debt-reduction companies work?

We Answered:

They call the credit and try to negociate interest rate reductions and forgiveness of debts.

They usually charge a percentage for this.

You can do it yourself, and save what they charge.

Any debt that is forgiven, counts as income for your taxes, unless it is discharged in a bankruptcy. So that has to be considered.

Your best bet, is to contact a Bankruptcy Attorney, they can do the same negociations, and are a lot more honest about their fees. They can help even if you do not file for Bankruptcy. Usually, their initial consultation is free. They have more negociating power I think since they know the laws quite well, and collection agencies cringe at dealing with bankruptcy attorneys, since a bankruptcy can stay all their contracts and stop all collection efforts except through the bankruptcy court.

Debt Consolidation is a loan that combines all your payments into one, and you normally pay less per month, but a heck of a lot more inthe long run. They tend to keep you in debt longer. Your Ad Here

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