I have 2 credit cards that I can not make payments on. I would like to clear this problem up but I don't know what's the best solution. My credit has always been good. Just recently I have had some unexpected bills to come up so therefore could not make my credit card payments. Can you guide me in the right direction?
I can think of a few possible ways to assist you in repaying your outstanding debts, some that will negatively effect your credit score, and others that will not. Which option is the best for you depends on your income, your debts, and your other factors, such as whether or not you own a home.
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If you own a home, a secured debt consolidation loan may be the right choice for you. This type of loan is essentially a home equity loan which is used to pay off your other creditors. Secured consolidation loans help many consumers by consolidating all of their debts into a single monthly payment with a lower interest rate and payment amount. Since a consolidation loan would pay all of your outstanding debts in full, it should not have a negative impact on your credit rating. However, you should think carefully before borrowing money against your home to pay off credit cards and other unsecured debts; you will be converting what was previously unsecured debt into secured debt. This could cause you problems down the road if for some reason you are unable to make your payments, or if life circumstances force you to file bankruptcy, as you may not be able to discharge the secured debt as you would unsecured debt. However, secured debt consolidation loans work for many people, so this is an option to consider carefully -- the Bills.com Savings Center is a great resource to help you find a lender for this type of loan. Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the loan page and find a loan that meets your needs at: Mortgage Refinance Quote
Another option to consider is a Consumer Credit Counseling Service, or CCCS. CCCS companies offer numerous services, such as financial counseling and budget planning, as well as Debt Management Plans (DMPs). In a DMP, the CCCS would arrange a new payment amount with each of your creditors, usually based on a reduced interest rate. You would then make a single monthly payment to the CCCS which would distribute the funds to your creditors, based on the new payment amounts. A CCCS program should not affect your credit score, or your FICO score, as FICO no longer factors credit counseling into your FICO score calculation. Since maintaining your credit rating is a major concern, make sure that the CCCS plan you are considering will keep you accounts current. There are several drawbacks to CCCS that you must consider. First, depending on your creditors, it may not be able to reduce your monthly payments enough to improve your financial situation. Second, it may have a negative impact on your ability to obtain a loan. Even though CCCS programs do not generally affect your credit score, many lenders view enrolling in a CCCS program the same as filing Chapter 13 bankruptcy when making lending decisions, so you may not wish to enter into a DMP if you anticipate any large purchases, such as home or an auto, in the near future. Third, the average DMP takes around five years to pay off your debts, so you must be willing and able to commit to a long-term repayment plan.
If you find that neither of the two options mentioned above will lower your monthly payments enough to improve your financial outlook, you may also want to consider the services offered by debt settlement firms. Rather than making monthly payments to your creditors, these programs negotiate lump sum settlements with your creditors, frequently reducing your debts by 50% to 60% of your principal balances. These programs usually take only 2-3 years to complete, so this is a good option for many people to rid themselves of debt in a relatively speedy manner. In many cases they can also reduce your monthly payment toward your debt. There is one major drawback to debt settlement programs -- they will significantly damage your credit rating while in the program and for at least a year or two afterwards. However, if you are currently unable to afford to pay your creditors, the hit to your credit may be worth the benefit of ridding yourself of credit card debt.
Depending on your income and the type and amount of debt, one of the several options I have described above may be able to help you. I encourage you to explore the Bills.com website, /debthelp/ to read more about these and other options available to you.
I hope this information helps you Find. Learn. Save.