My quick recommendation is that a Consumer Credit Counseling Service is one part of your solution. I will break down your situation into parts and give you my thoughts on the different options that can help get control your debt and reduce your stress.
You have different types of debt. Some of your debt is secured and some is unsecured. I will focus on the solutions to your unsecured debt problems, but also give you some quick tips for dealing with your mortgage and student loan debts.
Mortgage & Student Loan Solutions
Your mortgage and student loan debts must be dealt with separately. A reasonable goal is to lower your payments. Then, the monthly savings from lower mortgage or student loan payments can be used to resolve your unsecured debts.
- Student Loan Consolidation- The best way to reduce your student loan payments is to consolidate your loans, if you are eligible. You didn't say if your student loans are federal student loans, private student loans, or a combination. It is easier to consolidate federal student loans than private ones. Read the Bills.com article on student loan consolidation to learn more.
Underwater Mortgage Programs- There are different programs available that assist homeowners who owe more on their homes than they are worth. The type of mortgage you have is crucial, as the programs that can help you are based on who backs or guarantees your mortgage.
- HARP 2.0- The HARP 2.0 program is available to borrowers whose mortgages are backed by Fannie Mae or Freddie Mac. If you are eligible for a HARP mortgage, then you can refinance your loan at today's low rates.
- FHA or VA Streamline- If your loan is guaranteed by either the FHA or the VA, a streamline refinance gives you access to a low interest rate refinance, even though you are underwater.
- Loan Modification- A loan modification could lower your monthly mortgage payment, but it seems that many lenders require borrowers to be behind on their payments to qualify. You may not meet the hardship requirements to successfully modify.
Unsecured Debt Options
I break down my suggestions for resolving your unsecured debt into two basic categories:
- Do it Yourself Options
- Consumer Credit Counseling Services
Ways to Reduce Debt on Your Own
Not every debt problem can be solved by oneself, but looking at solutions you can put in place on your own is a sensible place to start. Here are a few do-it-yourself suggestions:
- Speak With Your Creditors- A good first step is to speak directly with your creditors to see if any are willing to lower your interest rate. This approach has a better chance of success the stronger your credit rating.
- Balance Transfers- Balance transfer offers are not as plentiful as they were a few years back, but they still exist, though they also require strong credit. If you balance transfer debt to a low-interest rate work to pay off as much as you can before the introductory low rate expires.
- Optimizing Payments- Make sure that you are paying your bills in the most efficient way possible. Either take every dollar about your monthly required payments and devote them to the unsecured debt with the smallest balance or to your debt with the highest interest rate. Both strategies have benefits. When you pay off the smallest balance debt, you get a psychological boost that keeps you motivated to keep attacking your debt. It feels good to cross one creditor off your list! You save a bit more money, when you pay your highest interest debt first. What is most important is that you pick a strategy and stick to it.
- Negotiate Settlements- Successfully negotiating settlements with your creditors means that you pay back less than you owe. However, creditors will not accept settlement offers from customers who are current on their accounts. You have to be delinquent, which harms your credit, exposes you to aggressive collection, reduces your ability to refinance, and increases your stress.
Consumer Credit Counseling Services
Consumer Credit Counseling Services offer a two-pronged approach to paying off your unsecured debts. A good Consumer Credit Counseling Service can help you get of debt faster and at a lower long-term cost. Consumer Credit Counseling Services are especially effective for someone, like you, who has high-interest credit cards.
- Budget and Financial Review- Every reputable Consumer Credit Counseling Service starts by looking at your budget, analyzing your income, expenses, debts, and assets. Budget review is a good idea any time someone is under financial strain. A credit counselor will give you a professional opinion, which is even better.
- Debt Management Plan (DMP)- If cutting expenses and spending your money wisely will not solve your problem, your Consumer Credit Counseling Service may recommend a DMP. The main benefit of the DMP is that it can lower your interest rates. Because you are currently making only minimum payments, it will take you many years to get out of debt and your accumulated interest charges on your high interest debt will be massive. Consumer Credit Counseling Services will get you out of debt at a much lower cost in 4½ to 5 years.
- Reasonable fees- Consumer Credit Counseling Services have reasonable fees that are broken into two parts, an enrollment fee and a monthly maintenance fee. State law caps the fees. Enrollment fees range from $25 to $75 and monthly fees should not exceed $50.
Why Choose Consumer Credit Counseling Services?
Based on the debts you have and an analysis of the available options, I recommend that you speak with a reputable Consumer Credit Counseling Service, to hear exactly what kind of plan can be put together. Here are the main benefits I see for you
- Professional Assistance -Do-it-yourself solutions, while worth exploring, are tough to accomplish. You can try to lower your own interest by speaking with your creditors, but a credit counseling service will lower your high-interest debt. Your high-interest credit card debt is just the kind of problem that credit counseling works best on. The Consumer Credit Counseling Service will give you a defined plan, so you know exactly when you will be debt free if you follow the plan.
- Reduced Stress - Working with a quality Consumer Credit Counseling Service will reduce your stress. You will benefit from the free financial and budget review.
- Credit Score- Credit Counseling won't harm your credit score. Just make sure that no payments are missed in the initial phase, when your DMP is getting set up.
- Affordable Payment -You have good income, so you can afford the payments. Not being able to afford the monthly payment is the biggest cause of dropping out from a Consumer Credit Counseling Service. As many as 75% of customers that enroll drop out, mostly due to committing to a payment that they can't make.
- Get out Debt Faster- Because you are making your payments now, you might be able to accelerate your DMP, because the monthly DMP payment should be smaller than the payment you are making to your creditors. If you are able to add any savings you can realize by working on your student loans and mortgage, then you can finish the program even faster. the smaller monthly payment that is likely to be required in your DMP will give you the opportunity to accelerate your program.