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My Rate Jumped on My Credit Card. Help! - The Bills.com Blog
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My Rate Jumped on My Credit Card. Help!
Thursday, Jul 9, 2009
Question: Can FIA, my creditor, which is trying to charge me 34.88% interest that I cannot pay, take or in any way mess with my home or my vehicles, which are paid for? Also, before FIA WENT CRAZY I had a credit score of 708. I am afraid to look now.
Answer: First, allow me to make an editorial comment. Throughout 2009 we've seen credit card companies jack-up interest rates for customers who previously were current in their payments. The credit card companies say they are doing so because they are being hit by rising default rates. Some of the more clever companies are boosting rates for customers that fit certain spending profiles that indicate they may be financially distressed. This is, in some respects, an understandable response. When a company misses its profit goals a reasonable reaction is to raise prices. However, by boosting the interest rates to loan-shark rates, this company seems to be inviting its customers who are living on the edge of their finances to default. This exacerbates the company's profit woes.Let us get to work on your problems and explore your options.
The four primary concerns for most consumers are: i) monthly payment, ii) time to debt freedom, iii) total cost, and iv) the credit rating impact of the consolidation program. Be sure to evaluate each program, relative to your prioritization of these factors.
Since there are a variety of debt consolidation options, including credit counseling, debt negotiation/debt settlement, a debt consolidation loan, bankruptcy, and other debt resolution options, it is important to fully understand each option and then pick the solution that is right for you.
Credit Counseling
Credit counseling, or signing up for a debt management plan, is a very common form of online debt consolidation. There are many companies offering online credit counseling, which is essentially a way to make one payment directly to the credit counseling agency, which then distributes that payment to your creditors. Most times, a credit counseling agency will be able to lower your monthly payments by getting interest rate concessions from your lenders or creditors. It is important to understand that in a credit counseling program, you are still repaying 100% of your debts -– but with lower monthly payments. On average, most online credit counseling programs take around five years. While most credit counseling programs do not impact your FICO score, being enrolled in a credit counseling debt management plan DOES show up on your credit report and, unfortunately, many lenders look at enrollment in credit counseling akin to filing for Chapter 13 Bankruptcy –- or using a third party to re-organize your debts.
Debt Settlement
Debt settlement, also called debt negotiation, is a form of online debt
consolidation that cuts your total debt, sometimes over 50%, with lower monthly payments. Debt settlement programs typically run around three years. It is important to keep in mind, however, that during the life of your debt settlement program, you are NOT paying your creditors. This means that a debt settlement solution of online debt consolidation will negatively impact your credit rating. Your credit rating will not be good, at a minimum, for the term of your debt settlement program. However, debt settlement is usually the fastest and cheapest way to debt freedom, with a low monthly payment, while avoiding Chapter 7 Bankruptcy. The trade-off here is a negative credit rating versus saving money.
Debt Consolidation Loan
Many people think first of a debt consolidation loan when seeking online debt consolidation. This option typically means a second home loan (or home equity line of credit) or refinancing your primary mortgage. In a debt consolidation loan, you exchange one loan for another. The most frequent form is taking out a mortgage loan, which carries a lower interest rate and is tax deductible, to pay off high interest rate credit card debt. It is important to be aware that shifting unsecured debt to secured debt can create a volatile situation, if there is ever a chance that you cannot afford the new mortgage payment you are now putting yourself at risk of foreclosure! In the case of a debt consolidation loan, most mortgages are 30-year loan, which means that the total cost and the time to debt freedom could be very high, but the monthly payment will be lower than other options and there is no credit rating impact.
Bankruptcy
Bankruptcy may also solve your debt problems. A Chapter 7 bankruptcy is a traditional liquidation of assets and liabilities, and is usually considered a last resort. Since bankruptcy reform went into effect, it is much harder to file for bankruptcy. If you are considering bankruptcy, I encourage you to consult with a qualified bankruptcy attorney in your area.
Analysis
Although there are many forms of online debt consolidation, many people with good to perfect credit who own homes should look into debt consolidation loans, while consumers with high credit card debt and poor credit may want to explore debt settlement or debt negotiation. However, each consumer is different, so find the online debt consolidation option that fits
Debt Consolidation Loan
Many people think first of a debt consolidation loan when seeking online debt consolidation. This option typically means a second home loan (or home equity line of credit) or refinancing your primary mortgage. In a debt consolidation loan, you exchange one loan for another. The most frequent form is taking out a mortgage loan, which carries a lower interest rate and is tax deductible, to pay off high interest rate credit card debt. It is important to be aware that shifting unsecured debt to secured debt can create a volatile situation, if there is ever a chance that you cannot afford the new mortgage payment you are now putting yourself at risk of foreclosure! In the case of a debt consolidation loan, most mortgages are 30-year loan, which means that the total cost and the time to debt freedom could be very high, but the monthly payment will be lower than other options and there is no credit rating impact.
Bankruptcy
Bankruptcy may also solve your debt problems. A Chapter 7 bankruptcy is a traditional liquidation of assets and liabilities, and is usually considered a last resort. Since bankruptcy reform went into effect, it is much harder to file for bankruptcy. If you are considering bankruptcy, I encourage you to consult with a qualified bankruptcy attorney in your area.
Analysis
Although there are many forms of online debt consolidation, many people with good to perfect credit who own homes should look into debt consolidation loans, while consumers with high credit card debt and poor credit may want to explore debt settlement or debt negotiation. However, each consumer is different, so find the online debt consolidation option that fits
for you.
Here are some fast tips for your own quick Debt Consolidation Evaluator:
1. If you have perfect credit and have equity in your home -- consider a Mortgage Refinance.
2. If you can afford a healthy monthly payment (about 3 percent of your total debt each month) and you want to protect yourself from collection and from going delinquent -- consider Credit Counseling.
3. If you want the lowest monthly payment and want to get debt free for a low cost and short amount of time, AND you are willing to deal with adverse credit impacts and collections -- then evaluate Debt Settlement.
4. If you cannot afford anything in a monthly payment (less than 1.5 percent of your total debt each month) -- consider Bankruptcy to see if Chapter 7 might be right for you.
Bills.com makes it easy for you to apply for traditional forms of debt relief .
Liens, levies, and garnishments
Finally, regarding your question about the creditor "messing with your home or vehicles," let us look at your rights. Some states bar creditors from garnishing wages. If you are in a state that allows wage garnishment, creditors must go to court before doing so. You will be summoned to attend a hearing where the creditor will ask a judge for an order to garnish your income, levy your bank accounts, or put a lien on your property. You will have a chance to argue your side and present financial data showing what you can afford. The judge may or may not consider your information when deciding whether to grant the creditor's requests, but at least you made your position known.
A lien is a legal claim against a mortgaged property, which must be paid when the property is sold. What this means is that if and when you sell your home, the lien holder would have claims on the proceeds of the sale to the extent that their overdue debt is satisfied in full. A creditor just cannot place the lien because they want to, they have to file a suit in court and get a court-ordered judgment to do so.
Regarding your vehicles, if the creditor sues and obtains a judgment against you it could attempt to force the sale of various items of personal property to pay the outstanding debt. This procedure is very seldom used except in those cases in which the debtor owns high-value luxury items. For example, if you own a collection of rare cars, they might be targeted by the creditor.
I hope this information helps you Find. Learn & Save.
Best,
Bill
www.bills.com/blog/
Here are some fast tips for your own quick Debt Consolidation Evaluator:
1. If you have perfect credit and have equity in your home -- consider a Mortgage Refinance.
2. If you can afford a healthy monthly payment (about 3 percent of your total debt each month) and you want to protect yourself from collection and from going delinquent -- consider Credit Counseling.
3. If you want the lowest monthly payment and want to get debt free for a low cost and short amount of time, AND you are willing to deal with adverse credit impacts and collections -- then evaluate Debt Settlement.
4. If you cannot afford anything in a monthly payment (less than 1.5 percent of your total debt each month) -- consider Bankruptcy to see if Chapter 7 might be right for you.
Bills.com makes it easy for you to apply for traditional forms of debt relief .
Liens, levies, and garnishments
Finally, regarding your question about the creditor "messing with your home or vehicles," let us look at your rights. Some states bar creditors from garnishing wages. If you are in a state that allows wage garnishment, creditors must go to court before doing so. You will be summoned to attend a hearing where the creditor will ask a judge for an order to garnish your income, levy your bank accounts, or put a lien on your property. You will have a chance to argue your side and present financial data showing what you can afford. The judge may or may not consider your information when deciding whether to grant the creditor's requests, but at least you made your position known.
A lien is a legal claim against a mortgaged property, which must be paid when the property is sold. What this means is that if and when you sell your home, the lien holder would have claims on the proceeds of the sale to the extent that their overdue debt is satisfied in full. A creditor just cannot place the lien because they want to, they have to file a suit in court and get a court-ordered judgment to do so.
Regarding your vehicles, if the creditor sues and obtains a judgment against you it could attempt to force the sale of various items of personal property to pay the outstanding debt. This procedure is very seldom used except in those cases in which the debtor owns high-value luxury items. For example, if you own a collection of rare cars, they might be targeted by the creditor.
I hope this information helps you Find. Learn & Save.
Best,
Bill
www.bills.com/blog/
Also, make sure to get a free financial health check-up with Bills IQ!
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