Lately many Americans are confronted with soaring credit card loans, large minimum month to month repayments and it’s becoming harder and harder to pay our monthly obligations. As we start to drop behind with our pay back we recognize that if don’t take steps we could end up in a dire situation that will be very hard to fix. There are a number of options/services that can assist you take control of your finance and help you get out/reduce your debt. Here are some of them to get you started on the track to recovery.
First you can continue to do nothing but pay your smallest amount of payments but your debt will continue to grow since you are paying interest on interest in other words there is a compounding affect to your debt, the bigger the debt the larger the interest.
This tends to come about when you only pay minimum repayments but continue to use your card. let’s take an example: you have a new c/card with 10k limit and you begin using it after the 1st installment your minimum payment for a $1000 dollar would probably be pretty small no big issue on the following statement you increase your debt to $3000 and the minimum repayments increase substantially you pay the minimum repayments and continue to use your card. At the end of the circle you’ve spent your ten thousand dollars but since you only made minimum repayment, you only paid the interest on the outstanding balance not the principle, now you are left with ten thousand dollars debt plus interest on your 10k principle debt .As you can see a snow ball effect is taking place here. When you are late or miss repayments that payment is added to your total debt and the interest is calculated on the total amount.
Continue doing that and your debt will rise in leaps and bounds. The main option you have when you are at this point is some form of loans consolidation.
here’s a small piece of information that will give you food for fought.According to bankrate.com on a thirty thousand dollar debt it will take nearly 60 years to pay back your loan and it will cost you over $100K in interest that’s probably not where you want to be . I’m sure you can find better things to do with our $100k besides paying it as interest to credit card providers. Next option is to look for debt consolidation loan. Here again you have a number of option you can go with a highly regarded debt consolidation group and they will consolidate your loans into one and set up a monthly repayment timetable for you to follow. Your interest rates will most likely be smaller and the time frame of the loan will be determined according to your financial position. You will pay the agency their fees and on average you should end paying your debt between three to seven years.
one more option is to use nonprofit companies also known as Consumer Credit Counseling these firms do the same job as paid debt consolidation firms but they are paid by credit card companies themselves. A word of caution here even if the title says nonprofit not all firms are free of charge so ensure you know upfront what you are getting into. Unfortunately these programs are not very successful due to the fact that your credit report has a status which is parallel to bankruptcy and a good number of people drop after 24 month at best.
The last possibility is Debt Settlement negotiations. This is a popular program because of its many advantages to clients. Debt Settlement Companies are experts at negotiating your debt down, on average all debts are reduce from 40% to 70% of what you owe depending on who your lenders are.
Once you signed with a debt settlement agency you can direct all your debt collectors to do business directly with them. Like any debt consolidation plan you will have to pay a monthly repayment into a trust fund that will pay back your debt. The down side as you might think is the firm’s costs unlike the CCC that get paid by credit card businesses these debt management groups charge somewhere between 15-20% so on a 30k debt you can anticipate to pay around $5k in fees but if you where to put aside 40-50% of your debt you still save around $10k after costs. Turnaround time to complete your loan is also much shorter from 12-36 months
Probably one of the most important advantages is that all through this time, the creditors will be reporting delayed pays on your credit report while you are paying your debt. As settlements are reached with each lender, the creditors will report a “settled in full “or “paid with a zero balance.” meaning, at the end of the program, your debt to income ratio will have improved and your credit will begin to restore itself for the future.