I ran across a statistic the other day that just flat-out amazed me. It was that 36% of people with credit cards do not know how much interest they’re being charged on the credit card they use the most often. I suppose that if you’re like me and usually pay your balance each month, you wouldn’t be much concerned about your interest rate. However, if you’re like the average American and have $7,149 in credit card debt and $15,325 in household debt – it’s very important for you to know how much interest you’re paying.
Why is this important?
There are several reasons why it’s important to know how much interest you’re paying on your credit cards. First, the interest you’re paying is basically buying you nothing. If you are paying, for example, $100 a month in interest, you might just as well open the window and throw out a $100 bill. The only thing that you’re receiving of value is time – that is time to pay off your credit card debt.
But there’s a second and even more important reason to know how much interest you pay each month. If you’re making only minimum payments on your credit cards each month, you may be paying only you interest charges and nothing against your balances. This means that theoretically you would never get out of debt. In fact, I saw one example recently of a couple that owed $90,000 in credit card debt. The shocking fact is that if they paid $400 a month against that debt, they would literally never become debt free. Just as bad, if they paid $500 a month against those debts, it would take more than 28 years for them to become debt free.
What to do about big debt
If you’re in debt big-time, you at least have some options. You could go to a consumer credit counseling agency where you would receive help in organizing your finances and in developing a payment plan. If both you and your creditors accept your payment plan, your debts would be consolidated in that you would no longer have to pay all of your creditors. The consumer credit counseling agency would pay them and you would send it a check each month for the four or five years it would take you to complete your plan.
Get a loan
A second way to deal with big debt is to get a debt consolidation loan. You could talk to your bank or credit union or, failing that, go online and find a lender. You should be able to get what’s called an unsecured loan or signature loan if you owe less than $10,000. If you owe more, you will probably have to get a secured loan or one where you pledge some asset as collateral. The most popular of this type of loan is a second mortgage or homeowner’s equity line of credit. A debt consolidation loan will probably take you anywhere from seven to 10 years to pay it off and it leaves your house at risk. This is because should you default on the loan, your lender could repossess it leaving you basically homeless.
File for bankruptcy
More and more Americans are choosing to file for a chapter 7 bankruptcy as it’s a way to discharge or get rid of most unsecured debts in just three to six months. This includes credit card debts, medical bills and personal lines of credit. However, a chapter 7 bankruptcy can do nothing to get rid of secured debts such as your mortgage or auto loans. A chapter 7 will also not discharge student loan debt, alimony and child support and any back taxes you owe. Plus, a bankruptcy will stay on your record or as long as 10 years, during which time you’ll have trouble getting any new credit or maybe even renting a place to live.
National Debt Relief to the rescue
If you have more than $7,500 in debt and would rather not file for bankruptcy, we can help. Our debt counselors can negotiate with your creditors to get both your interest rates and balances reduced so you might get out of debt in 24 to 48 months. It’s likely that they will save you thousands of dollars to boot. Call our toll-free number today for more details about debt settlement and how we could use it to help you.