Information and Advice on Help with Credit Card Debt
I have a substantial amount of credit card debt. What would be the best option for me?
I have a substantial amount of debt (credit card) and am interested in getting just one payment. What would be the best option for me? I don't own a home but I have a decent credit score.
If you do not own a home, I can only think of two main options for you, namely Consumer Credit Counseling (CCCS) or a Debt Settlement program. But each of them has an effect on your credit one way or the other. If you are looking to keep your credit intact then the only way to get a single payment on your credit cards is to get a personal unsecured loan for the amount. There are limitations to the total amount a bank will disburse as an unsecured loan and the interest rates would not be substantially lower than your credit cards. Either way, this is the option to pursue if you do not want to hurt your credit.
Now for your other options. The four primary concerns for most consumers are:
- Monthly payment
- Time to debt freedom
- Total cost
- The credit rating impact of the consolidation program
Be sure to evaluate each program, relative to your prioritization of these factors. Here is how each of the two programs work:
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, 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.
I suggest that you get a free consultation from one of our preferred debt help partners to explore your options in more detail and also to get more information. You can do so by filling your information at: Debt Relief Savings Quote.
I hope the information provided helps you Find. Learn. Save.
Dealing with debt
Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q4 2022 was $16.91 trillion. Auto loan debt was $1.55 trillion and credit card was $0.99 trillion.
A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.
Collection and delinquency rates vary by state. For example, in Tennessee, 15% have student loan debt. Of those holding student loan debt, 9% are in default. Auto/retail loan delinquency rate is 5%.
While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.