Will Credit Card Debt Consolidation Help You?
Many residents of Massachusetts and consumers across America often find that unforeseen circumstances have contributed to unmanageable credit card debt. They find themselves caught in a cycle of debt that's difficult to escape. More and more consumers are searching for the optimal way to pay off credit cards. This is why credit card debt consolidation, and even credit card debt consolidation loans, have become popular methods to pay off high interest credit card debts.
It is apparent that overspending on credit cards due to hardships that occur, or simply as a result of lack of financial discipline, has become a major source of debt and stress for many individuals and families. Visa, MasterCard, Discover, Capital One, Chase, Citi card, and many other credit cards can be very convenient and tempting to use, but when times get tough, and you can't get out from under your high-interest revolving credit card debt, a major financial crisis can hit you quite suddenly.
Again, to be fair, many people who can't pay down their credit cards have experienced a financial or family hardship. They may have no choice but to turn to high interest credit cards to pay for the essentials of life such as food, medicine and maybe even utility bills. Consumers who find themselves in this difficult situation should not feel despair or guilt. Instead, they should take comfort in knowing that good people often get into debt for a variety of reasons, and help is available through a variety of credit card debt consolidation or debt relief hardship programs. The first step is to decide you want to do all you can to put debts behind you and get on the path to a debt-free life.
If you are in need of debt relief assistance due to high credit card debt or a financial hardship, see how debt relief could help you. Get a free debt relief evaluation and savings estimate today.
How Does Credit Card Debt Consolidation Work?
A credit card debt consolidation program aims to combine, or "consolidate," all of your high interest credit cards and other unsecured debts into a single, more manageable and more structured monthly payment. For individuals and families struggling to take control of their finances, these debt consolidation or debt management plans (DMPs) can help bring much needed relief from high interest rate debts, late fees, and penalties. A debt consolidation program can also provide a proven and predicable path out of debt for those who have the discipline to stop using credit cards and pay down their debts by adhering to a monthly schedule. These programs aren't the "magic bullet" to credit card debt payoff, but they can be quite effective. They may even save thousands of dollars for consumers who have the discipline and wisdom to put the cycle of debt behind them.
Typically, a credit counseling company coordinates credit card debt relief or debt management plans. The company will conduct brief interviews with consumers to gain an understanding of the hardship being experienced, how much actual credit card debt the consumer has and how much money the consumer can realistically set aside each month to pay down or pay off credit cards.
The credit counselor or debt counselor will then draw from the information gained from these interviews and create a payment strategy that is manageable for the consumer. Counseling services will also propose that creditors lower interest rates on credit debt, and possibly waive any late fees and penalties. Those creditors who accept the proposals are then added, one at a time, to the debt management plan (DMP). For consumers who get relief from high interest rates and continue to follow the debt management plan by paying off the existing principal amount of credit cards, the savings, as compared with paying monthly minimums for years and years, can be quite significant.
Credit Card Debt Relief Options
Credit card debt consolidation (may also be referred to as credit counseling or debt management) programs are not the only debt relief options. Other popular debt relief choices include personal debt consolidation loans, debt settlement, or the debt relief option of last resort, bankruptcy.
A credit card debt consolidation loan is intended to "consolidate" or combine several high interest rate debts into just one lower interest rate loan. Certainly debt consolidation loans have their place and they have been able to help many consumers. However, it's important to know that credit card debt consolidation loans typically require the consumer to put up their home or other asset as collateral, and the consumer could lose the home or other asset should they default on the terms of the loan.
Converting unsecured debt such as credit cards into secured debt that puts your home on the line may be a risky course of action. In addition, it's a sign of the times that many consumers who take out debt consolidation loans do indeed use the proceeds of the loan to payoff credit card debts, but unfortunately end up compiling a whole new mass of credit card debts. Now, the consumer has to pay off the debt consolidation loan as well as the additional credit card debts. In this scenario, the debt consolidation loan has only intensified their debt crisis.
Find out if you can get credit card debt relief without a loan. Get your free debt relief analysis and savings estimate today.
Debt Settlement Option
If you are looking for another option to debt consolidation loans, debt management plans, or credit counseling -- debt settlement, also known as debt negotiation, is another increasingly popular debt relief option worth exploring. Keep in mind, however, that debt settlement differs significantly from debt management. The goal of debt management through credit counseling is to pay off the full amount of debts over time at a reduced interest rate, while the goal of debt settlement (typically an option that more applies to consumers with high credit card debts of $20,000 or more) is to "settle" debts for less than the full amount owed. Settlement is considered a viable alternative to personal bankruptcy for those who would prefer to pay a lump sum settlement rather than default entirely on their debt and file for bankruptcy.
Consumers can potentially save a substantial amount of money with debt settlement. It is a more aggressive form of debt relief program that generally encourages consumers in distress to redirect the funds they would normally be paying to credit card companies, thus allowing them to accumulate the funds necessary to extend a settlement offer to creditors. When consumers use this strategy of building up a settlement fund, instead of paying according to cardholder terms, creditors have the legal right to threaten legal action in order to recoup their losses and to discourage consumers from going this route.
Another important point to consider regarding debt settlement or debt negotiation is the fact that there are tax implications to debt settlements: The amount of money saved as a result of a successful settlement, which can be a large sum, is subject to federal taxation. Despite the potential legal and tax implications of debt settlement, this debt relief options has been increasingly popular for those who are experiencing a financial hardship and want to do their level best to settle their debts for a reduced amount, rather than walk away from their debt entirely and file for bankruptcy.
What might motivate credit card companies to agree to settle with consumers? For those consumers who fall seriously behind in payments, credit card companies may often "sell off" the debt to a third party collector for as little as 10 cents on the dollar, therefore creditors may be willing to agree to a reasonable settlement offer from consumers rather than get little or nothing if the debt is "sold off," or the consumer files for personal bankruptcy. Another important item to note regarding settlement: While credit scores will be negatively impacted when consumers stop paying credit card companies according to terms, the impact of debt settlement on personal credit is typically not as serious or long lasting as bankruptcy.
State Programs for Low-Income Individuals
While debt relief programs help many consumers during times of financial hardship, some people may also benefit from state-assisted programs and services to help them pay for utility bills, grocery bills, or childcare. Many of these services help low-income families and individuals pay for the basic essentials, regardless of their credit card debt situation.
To learn more about these resources and more, go to the state's homepage Benefits section.
Explore Your Debt Relief Options
The main point to remember is this: There is help available if you are overburdened with high interest credit cards and other unsecured debts. While debt relief won't make debts magically disappear, it is important that consumers evaluate and compare all of their debt relief options, consider getting help from BBB-accredited debt relief providers, and make a sincere effort to pay down credit cards and other unsecured debts on an accelerated program. You do not have to live your life in debt. You can take charge of your debts and head down a path to financial freedom, but it all begins with your decision to not allow debts to control your life!
Discover how debt relief may help you by requesting your free debt relief analysis and savings estimate today.