With the explosion of personal debt and the tightening of the bankruptcy laws, consumers are furiously searching for viable forms of relief.
For those who are keeping current or close to current on their credit card payments, but only make the minimum or slightly more than the minimum payment and see their balances going nowhere, there is a solution...
it's called debt consolidation.
This is not to be confused with a debt consolidation loan which merely trades one debt for another, and in many cases requires the family home to be put up as collateral.
In financial circles, turning unsecured debt (credit cards) into secured debt (the home) is almost never considered a good idea.
The main benefit in debt consolidation is the lowering of those killer interest rates, meaning more money goes toward principal.
For example, let's take a credit card with a $10,000 balance at 21% interest.
Most creditors require 2% of the balance as their minimum payment.
Under this scenario, your monthly payment would be $200, but only $25 of that payment will be going toward the principal! It's also not too hard to see that at this rate it could take 30 years to pay off this card, and that is with no further purchases being made.
Factor in any late fees, annual fees, and over the limit fees, etc.
and it's no wonder credit card companies are reporting record profits, all at the hard working consumer's expense! For clients who are behind, the program can offer additional benefits.
It can stop creditor calls which can be very annoying, stressful and sometimes embarrassing.
It can also re-age the accounts.
This means that the accounts will be brought to a current status after 1-3 on time payments through the program.
Another benefit for all clients is what's called the "snow ball effect.
" This means that once a creditor is paid off, the money slated for that creditor now goes to a remaining creditor on the program; usually the one with the highest interest rate.
This continues until all creditors are paid off.
Since the average consumer has 8 credit cards, this can greatly accelerate the timeframe required to pay off these debts while saving the consumer thousands in interest costs! If this sounds like a program that would help, then the next step is to choose a reputable credit counseling agency.
Since there are many to choose from, one needs to do his homework.
Look for one that is non-profit, that has NACCC certified counselors, that is ISO accredited, and that belongs to an industry association such as AADMO.
Make sure they do a budget analysis, provide an action plan, explain things clearly and answer any and all questions to your satisfaction.
Reputable agencies will allow you time to think things over, will not try to rush you into a commitment and will allow you to select a payment date that best fits your cash flow.
Lastly, don't despair.
There is definitely help out there and a light at the end of the tunnel.
If some or all of the above warning signs strike home, then it's probably time to do something.
Just do your research and don't procrastinate, because a small problem can mushroom into an insurmountable one very quickly.
The experts at Debt Options are at the ready to counsel and assist you on this and other possible options such as debt settlement.