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Posts Tagged ‘get rid of credit card debt’

There are a thousand and one commercials out there on debt management. It seems every time you watch TV, you see a couple of debt related commercials, right in between the Visa and MasterCard ones! This reflects how important debt management actually is.

The reason is because millions of us are dealing with more credit card debt than we can pay off. Their mailboxes are full of second, third, and final notices. Their phones are ringing off the wall with calls from bill collectors.

People can start struggling with debt for many reasons. Sometimes the reason is because of emergencies like sickness, injury, or the loss of a job that was believed to be secure. These things happen.

Sometimes people find themselves in deep debt because of their careless spending and oftentimes find themselves drowning in their sea of debt because of their inability to plan and budget. There was a time when debt management companies were more like social services than for-profit businesses. These debt management companies were nonprofit, and they were known as consumer credit counseling services (CCCS) affiliated with the National Foundation for Credit Counseling (NFCC).  But you could also go with debt settlement as well.

As more and more Americans became deeply embroiled in debt, companies began to spring up that are generally classified as debt management companies or debt settlement companies. These businesses do charge fees and their object is to make a profit.

Debt management agreements with debt management companies really are not for everybody who has a debt problem. The best way to assess for yourself whether a debt management company can help you is to add up all of your payments, and if you unsecured minimum payment obligation exceeds 20% of your take-home pay, then you might need their services.

Remember that only unsecured debt is covered by debt management companies. Unsecured debt is generally credit card debt. Your mortgage payment and your car payments are not unsecured debt.

The sound of getting a home equity loan even as interest rates are historically low to assist you to pay off your mountain of credit card debts might appear like a fantastic thought. It is important to understand what a home equity loan is and if it is the best option for you. You may find out that debt settlement is a better option to eliminate credit card debt.

A home equity loan allows you to borrow against your current equity in your house.  The more you have invested in your home, the bigger the home equity loan you will be eligible for. Basically, in order to get a home equity loan, your home is put up as collateral – that is, the basis – for the loan. Remember that your home can be foreclosed on, if you don’t make the necessary payments for a home equity loan. This is shocking, and most people don’t know anything about it.  A home equity loan demands serious consideration, and the ability to pay off the entire loan.

You will be trading credit card debt which is unsecured and can be written off in a bankruptcy filing, for secured assets which can be taken from you. Is this method of eliminating credit card debt really an equal exchange – giving up your house if you fail to make your credit card payments?

If you do not understand what equity is or how you can use it, you should inquire about it and see if a home equity loan may benefit you. Your equity is limited to the amount of your home load that has been repaid. So, you take the home’s current value and subtract it from the amount you still owe to pay for that house, which is how much equity you have in your home and what will ultimately be used to approve or deny your home equity loan application. For example, your home is currently worth $200,000 and you have $80,000 left to pay on your mortgage. Right now your equity is $120,000.

What about debt settlement? You can hire a debt settlement company or  work with your credit card companies yourself to reduce your debt , this is how debt settlement works. If you cannot satisfy the amount of the settlement, you would have to declare bankruptcy and the credit card company would be left holding the bag.

If they think it’s possible to recover at least some of what is owed, that would  make them agree for a settlement. And with debt settlement, you do not risk losing your home if you do not make the payments as with a home equity loan which makes it a more attractive option to eliminate your credit card debt.

Understanding the cost and the best way to approach debt settlement are also things you need to know before you decide to try this approach.  Learn all this and more at How To Eliminate Credit Card Debt.