Aug 5, 2011

Debt consolidation information

If you find yourself in debt and ready to make actions to get out of it there are different debt solutions available. Depending on your financial situation you can choose the right debt management strategy.

Talk to Your Lenders First

It is a good start to talk directly to the bank or a financial institution that you owe to. Usually they are interested in you paying off the debt not less than you are- if you are not paying your debt for a 6 month they need to write your loan as a loss and they hate to do this. Even after that point a bank is interested in getting the money back so it there is always a way to come to agreement.

Credit card balance transfer

If you have problems having too many credit cards with outstanding balances, first you need to figure out if you can lower your payments by consolidating your credit card balances on a single credit card. That can help you only if a new card has a lower APR than the old ones. You can benefit from the introductory 0% APR for balance transfer and purchases that many banks offer for the first 12-18 month when you open a new account. The best way to use balance transfer option is to pay off most of your balance during the introductory period – zero APR rate will give you a short brake to do this. Unfortunately this option is mostly available only for people with good to excellent credit score. Some cards have a balance transfer fee from 3% to 5% of the transaction –so this should be also considered. Find the best balance transfer options below – all of them have strong and weak points:

Discover More Card

  • 15 month intro 0%APR on purchases and balance transfer
  • 3% balancetransfer fee
  • Good cash back options 1% on everything, 5% on featured categories.
  • Excellent credit needed
  • No annual fee

Chase Slate card

  • 15 month intro 0% APR for purchases and balance transfer
  • 0% balance transfer fee for first 60 days
  • No annual fee

Citi Simplicity Card

  • 0% APR for 18 month on balance transfer and purchases
  • No annual fee
  • 3% balance transfer fee applies

Credit Card Debt Settlement

Another good and well-advertised debt reduction strategy is to go for debt settlement. It can apply to a credit card debt and to other debts as well. There are a lot of third party companies offering that services to individuals. They approach is rather simple- they sign the papers with you that they will act at your behalf to deal with your debts. Than they stop making payments to your lenders and start negotiating the terms again. They goal is to convince the banks to let you go after paying just a portion of your debt (sometimes debt settlement company can reduce it by as much as 30% to 60% after an excellent negotiation with your creditors). The problem is nobody knows for sure if they will succeed – if not banks will just add all the late payment fees and penalty APR to your existing debt. Another problem – nobody knows how long it will take to negotiate (read the previous sentence about the fees and try to imagine the
extra fees for another year of not paying your debt).  However, unlike debt consolidation, debt settlement affects your credit score negatively. Your credit score will be damaged significantly because debt settlement requires stopping paying the debt, so you will not have access to credits for a long time in the future. But it is a better option than you filing for bankruptcy. It does not hurt your credit score as much as bankruptcy does. And the last problem is that a lot of ‘debt settlement companies’ are just scums – so first read reviews, read the terms carefully and never pay in advance, pay only for the result.

Debt consolidation programs

One of the popular debt solutions is debt consolidation. It is usually a practice when you gather your multiple unsecured debts into a single loan with a one single monthly payment.

Consolidated Credit for Credit Consolidation

First you need to understand that this option requires you to take a new loan from the bank or a financial institution to cover existing ones that you already have. This is not an easy decision and you need to think twice before going that road. Often it is better if you can provide a valuable collateral such as a house or a car to secure a new loan – in that case you can get a loan with a smaller interest rate that your unsecured loans. Another advantage is that you will stop making multiple monthly payments to the multiple creditors and do a one monthly payment that is easier to manage.

A lot of banks offer credit consolidation programs – e.g. US Bank offers loans and credit lines (secured and non-secured), BankofAmerica offers debt consolidation solutions.

A new loan should have a longer term and less APR– that will help you to deal with lower monthly payments. All what you are required to do is to make regular monthly payments. By doing this, finally you will be able to pay off your all outstanding debts and finally achieve a financial freedom. The best feature of debt consolidation programs is that it does not hurt your credit score. Going for debt consolidation is a far better option than filing a bankruptcy. Personal bankruptcy, makes a long impact on your credit score, which seriously lowers your chances to obtain a new loan with good terms.

Debt management program

Another debt reduction plan that you can opt for is the debt management program. This option is usually offered by a credit counseling agency or professionals, sometimes, it can be offered online by debt management companies. A program or a plan offers you valuable budgeting tips and free counseling session so that will help you to find the best steps and decisions to help you paying off your debts. It is always good to have a face to face consultancy with a reputable professional – so it is good to check reviews for that services online before deciding.

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