If you’re in debt $5,000 or less, most financial experts will tell you that your best answer is to simply pay it off. However, to do this you will need to make more than just the minimum monthly payments required. Without getting into a lot of boring calculations, trust me when I say that if you always make just the minimum monthly payments required by your credit cards, you might not ever get out of debt.
On the other hand if you owe $10,000 or more, your best solution might be debt consolidation where you consolidate multiple debts onto just one and, hopefully, save money in the process.
The “A” of debt consolidation
The “A” of debt consolidation is always check out the company. There are debt consolidation companies available online who are basically scam artists. They’ll promise to settle all of your debts so you’ll have just one affordable monthly payment. You sign up for the program and start sending your payments. After few months, you get concerned because your creditors are still calling you and demanding payments. You telephone the debt consolidation company and are told, “don’t worry we’re in the process of paying them.” or some such. Unfortunately, what you finally figure out is that the debt consolidation company isn’t making any payments to your creditors and never will. It’s just keeping your money and you’re now in worse trouble than before you started the program.
The “B” of debt consolidation
The “B” of debt consolidation is balance as in zero interest balance transfer cards. If you’re not familiar with these cards, they are the ones where you can transfer the balances on other credit cards to one of them and not pay any interest for 6 to 18 months – depending on the card you choose. If you have multiple credit cards that have high interest rates, this could make a good deal of sense.
For example, if you have credit cards with interest rates of 18%, 20% or above, you could transfer the balances on those cards to a zero interest percent card and pay no interest for the term of the promotional period. This means that all of your payments would reduce your balance, which could help you get out of debt in a reasonable amount of time. But you need to be careful about the interest rate once your promotional period ends. Some of these cards have interest rates as high as 18%, which would put you right back where you started. You also need to be aware that most of these cards have fees of 3% to 5% of the balances you transfer. If you transfer a huge amount of debts, your fee could actually negate what you’re saving by having that interest timeout.
The “C” of debt consolidation
The “C” of debt consolidation is consumer credit counseling. There is probably a credit-counseling agency where you live that you could go to for help. If not, there are ones available via the Internet. Whichever you choose, you’ll have a counselor who will review all of your finances and work with you to create a budget and a payment plan. Your counselor will negotiate with all your creditors to reduce your interest rates and for them to agree to your plan. When all your creditors sign off on it, the credit-counseling agency will pay them and you will pay it monthly until you complete your plan. Unfortunately, you will have to give up your credit cards and your payment plan will probably take five years to complete. You’ll have to be careful to not take on any new revolving debt during those five years and, of course, there is always the very real possibility that not all your creditors will sign off on your plan.
The “D” of debt consolidation
There is actually a “D” to debt consolidation called debt settlement and it’s what we do. It can be a better solution than consolidation because our debt counselors can work with your creditors to have your balances and interest rates reduced. In fact, we usually save our clients thousands of dollars and have them on track to become free of debt in 24 to 48 months. Call our toll-free number today for more information or fill out our form for a free debt analysis.
I am an associate at National Debt Relief, which is a Debt Consolidation Company that has helped thousands of Americans facing credit card debt problems. We help with debt settlement, debt management, and other debt related financial crisis' facing consum