Credit Card Debt Consolidation Program

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Credit card debt - What you must do about it
For the average American family, debt, and especially credit card debt is spiraling out of control at a record pace. The average household credit card debt has risen dramatically from $3000 in 1990 to over $8000 today. Personal bankruptcies are also at an all time high, prompting Congress to consider a radical bankruptcy law overhaul, designed to weed out those who are merely taking advantage of t... Read debt consolidation 1 article



Difference between debt negotiation and debt management
Debt negotiation and debt management/consolidation both help consumers pay off their debts through two different approaches. Each affects your credit score, payoff period, and taxes differently. Before choosing either options, be sure you understand the long term consequences of each debt management option.

Influence On Credit Score

Debt consolidation is better of the two wh... Read debt consolidation 1 article



Credit Card Debt Consolidation Program
The credit card debt consolidation is a program that sums up all the credit card loans into one single loan. Thereby, the consumer pays one single monthly payment. The monthly payment and interest rates of the one single loan are lower than any of the credit card rate.

Nowadays, it is easier to get a credit card. The credit lenders mail the credit card application. Within days, the consumers get a credit card. It is so easy that we may have one to many credit cards. The credit card provides so much convenience. The consumers can purchase an item thru credit card loan right on most stores. The loans add up into one huge loan.

The credit lenders charges high interest rates on any outstanding loans. If you can not pay most of the outstanding loans, the amount owe grows really fast. Sometimes, the loans get out of hand. And, it is really hard to get back on good foot.

Once the consumers are unable to manage the outstanding loan, the credit card lenders send the outstanding loans to the collection agencies. The collection agencies call the consumers to repay the debt. It is their job to collect repayment from the consumers. Consequently, the consumers are bombarded with many calls from collection agencies.

During the debt crisis, the consumers can develop a realistic budget, seek credit counseling, apply for debt consolidation, or file for bankruptcy. To get back on track, the consumers must set a realistic budget. The budget tells how much the consumers can really use to repay the loan. The consumer lists all the income and expenses. Hence, the consumers will know the realistic budget.

The credit counselors guide the consumers to get out of debt. With credit counseling, the consumers repair bad credit rating, get peace of mind, and repay the loans.

Bankruptcy is way to declare to credit lenders that the consumer is unable to repay the loans. Now, the consumer is required to go credit counseling before the consumer can file for bankruptcy. By the way, bankruptcy tarnishes credit rating. And, the consumer may not be able to get loan, mortgage, or financing for seven years.

The consumers need a little hand in times of credit card debt crisis. With credit card debt consolidation, the consumers pay less on repayment, stop the debt collectors, and avoid the bankruptcy.

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Debt Consolidation versus Debt Settlement

The goal of both debt settlement and debt consolidation is to lower your debt. Debt settlement companies negotiate with your creditors to sometimes reduce the amount of your unsecured debt. There will be a fee associated with the program that equates to roughly 1% of the interest that you will pay if you continue to pay the creditors directly.

Debt settlement can reduce your debt 40% to 60%. A debt settlement program can also cut our payments by 40% in most cases making it easier to cope with your monthly budget. In most cases for a consumer in a debt settlement program they are typically debt free within 2-3 years that can be about half the time it would take in a Consumer Credit Counseling Program or a conventional debt consolidation loan.

Debt consolidation pays off your high interest debts with a low interest loan. Home equity loans provide the lowest rates, but after stretching out the loan over 20 years the 6% interest refinance winds up costing the same amount as a 21% interest credit card. A conventional bank loan will not pay off the debts but rather transfer the debt from one institution to another. This action appears to banks and mortgage companies as a last ditch effort on a consumers part to try and rectify a sinking situation. Many mortgage companies see debt consolidation loans as a sign of stress in your financial situation making it difficult for them to extend you credit in the future.

Credit Score Implication

Reducing your debts through debt settlement is a method to get out of debt in a short period of time relative to your credit history. You credit score will drop, making you ineligible for prime lending situations. You can apply for sub-prime credit after a year however the goal of a debt settlement program is to get out of debt not to create new ones.

Taking out a loan to consolidate your debt will have a major impact on your credit. Since your debt isn't actually decreasing, you will be negatively hit on your credit for opening another account making your overall situation more overextended. Most debt consolidation loans are issued with the assumption that the problem debt will be paid off and then the accounts closed. However 98% of consumers that get a debt consolidation loan do not close the problem accounts but rather make things worse by incurring new debt on the paid off accounts. Now the consumer is faced with the debt consolidation loan in addition to the new debt on the other accounts that were previously paid off.

Financial Choices

No one financial choice will fit everyone's needs. While debt settlement will have an affect on your credit report, additional loans may be too expensive. In extreme cases, debt settlement can help to avoid bankruptcy and costly debt consolidation loans. Many debts settlement companies report that about 50% of the debt that their clients put into the program is debt from a prior debt consolidation loan.




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Credit Card Debt Consolidation Program
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