Debt Consolidation For Credit Cards
If you are considering debt consolidation for credit cards, you need to read this blog post. First, it is important to know there are a few ways to consolidate your credit card debt. Each program being offered will be different. In any case, first, we will quickly go over the different types of debt consolidation, and then discuss a few pitfalls and other options.
Types Of Credit Card Debt Consolidation
Balance Transfer – When you do a balance transfer you are essentially transferring several credit card balances to one credit card. It could be due to a low introductory rate, or some other special terms, which are more favorable than the prior card or cards.
Debt Consolidation Loan – Some banks will offer you a loan that you can use to pay off your credit card debts. You will be left with one balance on the loan, and usually at a lower interest rate than the credit cards you paid off.
Debt Management Program – This is the most traditional form of debt consolidation. In this instance, you work with a credit management company. They establish a payment structure for you and a timeframe. The credit management company negotiates with your creditors to lower your balances. Usually, the negotiated amount is contingent upon you completing the consolidation plan.
Three Common Pitfalls To Credit Card Debt Consolidation
Fees And Costs – Whether the fees come in the form of high interest or third-party fees charged by your credit card management company, it is important to understand what fees you are being charged. The lengthy contracts consolidation companies provide you with can be difficult to sort through. The point is you are paying for a service. You are entitled to know how much the service is costing you. This way, you can comparison shop and set your bottom line for how much it is costing to eliminate your debt.
Dropping Out Of The Consolidation Program –
Many debt consolidation agreements are contingent upon your completion of the term. The term may be for three or more years. During that timeframe, anything could happen which might prevent you from being able to make your payment on time. You want to be aware of the penalty for late or missed payments, and get confirmation that you will not lose the progress you made along the way by making consistent on-time payments in the program.
Worrying Too Much About Your Credit Score –
It is important to be concerned about your credit score. You should think carefully before spending thousands of additional dollars for the sole purpose of sparing a few credit score points. As a bankruptcy attorney, I speak with clients every day who are worried about their credit score. I do my best to help them see the full picture. Often, those clients already have a reliable vehicle and own a home. If that is the case, I encourage them to look at the upside to eliminating the debt—no matter how they choose to do it—instead of obsessing over how it will affect their credit score.
What Other Options Are There?
Bankruptcy is worth considering. Both Chapter 13 and Chapter 7 are options in consumer bankruptcy. Every bankruptcy attorney I know in Charlotte, North Carolina will give you an honest answer as to whether you should file bankruptcy or not. This means you should consider having a free consultation with a bankruptcy lawyer to make sure you understand the cost of bankruptcy versus the cost of debt consolidation. If a client can eliminate $25,000 of unsecured debt by filing bankruptcy for under $3,000, it is going to be difficult to justify a debt consolidation program that charges $525 a month for 36 months.
Debt settlement is another option. Because we are a bankruptcy law firm, we obtain good results for clients attempting to settle the debt. When you are settling a debt with a creditor, you are proposing to pay them a small portion of the debt in 90 days or less, in exchange for forgiveness of the remainder of the debt. To accomplish this, you must have access to a lump sum of money to pay the creditor. It is not uncommon to receive a dramatic reduction from the outstanding balance in exchange for timely payment of a small percentage of the debt. In a prior post, we have discussed how a debt settlement affects your credit score.
Speak With A Bankruptcy Lawyer Today
If you are considering consolidating credit card debt, you deserve to understand all your options. We would be happy to discuss bankruptcy, debt settlement, and credit card consolidation with you. Then, we can help you make the decision that will work best for you. Sometimes, just one phone call is all it takes to discover you have more control over the situation than you thought.
If you would like to speak with a bankruptcy attorney, call us at 704.749.7747 or click HERE to request a phone consultation. Consultations are free and answering questions is part of our job. We are here to help.