How to Consolidate Credit Cards into a Lower Payment |
By Kenneth Long on October 12, 2010
.jpg.aspx) Your seven credit cards mean that you have seven different minimum payments, seven different due dates and seven interest rates. Wouldn't it be nice to consolidate those seven credit cards?
You may already know that consolidation loans are very much a thing of the past. Unless you want to tie up your home's equity, you can forget about this option.
Instead, you may be eligible for a lower consolidated payment by participating in a debt management program. This is a special program recognized by major creditors who provide benefits to program participants.
You would be right if you asked the question, Why would they be willing to lower my interest rates and payments? You are correct that it is not out of abundant generosity.
Major credit card companies maximize profits by charging interest rates on borrowed funds. Those profits disappear though when cardholders default on their debt.
When you show signs of financial stress, creditors are inclined to help you gain a greater control over your debt so that you may successfully repay what you have borrowed. You repay your debt with interest, albeit at a lower interest rate than before. They help prevent default, and giving you a break lowers this risk of default.
To find out if a debt management program is a feasible option for you, you must first go through credit counseling. Credit counselors provide personal counseling face-to-face or by telephone. There are also online counseling tools that can help you evaluate your financial situation from a more private situation. You can still request a call from a credit counselor to review your online session with you and make adjustments as necessary.
The result of enrollment into a debt management program is a single consolidated payment scheduled for the same date every month. Your credit counseling agency disburses those funds according to the terms of the program every month on your behalf.
The consolidated payment is usually less than what you were paying before. Occasionally it is the same, and it is possible that it could be more. Of course, you are able to see the recommendations by your credit counselor prior to ever enrolling in a plan.
You will still have a mix of interest rates rather than the single interest rate that a consolidation loan would carry. Usually those rates are substantially lower than your current interest rates. Creditor participation is voluntary, meaning that each creditor decides whether to grant you benefits as well as what benefits they would like to extend to you. Ultimately, they want to help you avoid a future default.
You do not have to be late to qualify for a debt management program. Creditors are interested in reducing your financial stress so that they can reduce the risk of a future default. Your debt management program can help you get rid of your credit card debt in as little as 3 to 5 years. Could debt management work for you?
|
Current Rating: 0 (0 ratings)