Credit card debt consolidation is a hot topic right now. But how does debt consolidation work. It really is quite simple—you consolidate all of your unsecured debts into one loan or debt relief option that allows you the convenience of paying all of your past bills with one monthly payment. There are 3 or 4 ways that you can do this and the one that will work best for you will depend on how much debt you have, if you are credit worthy at the current time and how long it has been since you have made payments on your debt.
Credit card balance transfers-If you have several small debts, you want to consider transferring them all to one credit card that has a low introductory rate. This requires that you have decent credit and that you be disciplined enough not to charge on the accounts that you transfer. Charging again will only get you into more trouble. You also have to be aware of when the introductory interest rate increases. If you have not paid your balance off at this time, you may want to consider transferring your balance again.
HELOC-A home equity line of credit is a mortgage that can be used to consolidate most any kind of debt, including credit cards. You do have to own a home and be credit worthy to get a HELOC. The interest rate will be lower than any credit card company can offer. The big problem here is if you default, you could lose your home. Your current credit card debt situation will get you harassed by collection agencies and possibly get your wages garnished, but you will not lose your home. It is never a good idea to use a debt repayment method that is secured with your home. I don’t really like the idea of getting a loan to pay off debt either.
Credit counseling-This is an option that consolidates your debt without a loan. Credit counseling is a service that works with your lenders to have you interest rates reduced (usually less than 10%). Your fees will be eliminated and collection calls will stop. You will make one monthly payment to your credit counselor and they will disburse it to your lenders. Credit counseling takes about 5 years to be debt free, on average. This credit card debt relief alternative will not ruin your credit.
Debt settlement-This is an option that does not require a loan. It can be done by you, by sending letters or making phone calls to your lenders and negotiating a settlement on you debts. You can also hire a company to do the same thing, but you will need $10,000 in debt to work with a service. Your lenders will normally settle for 40%-60% of your original credit card balance. With a service, you can make monthly payments. If you negotiate on your own, you will most likely have to pay the total settled upon amount at the time the negotiation is complete. Debt settlement will not be nice to your credit, but if you have a lot of debt or old debt, you probably already have credit problems. This is many times referred to as an alternative to bankruptcy.
Only you can decide which one of these options is going to work best for you. Get a free consultation and get the help you need selecting a free credit card debt relief option.
