Reducing credit card debt?

Question

I am on a budget, successfully last two years. Before then, we racked up nearly $9000 total in credit card debt on five cards. (home repairs, stuff). We have paid our credit cards on time, and have NO credit cards now. My problem, I am aggravated. Before my budget, I was late paying on two cards , and all cards jacked my rates to nearly 30%. So, even paying on time the last two years, the companies still deem me 'risky' since I only pay minumum. I still owe $9000!! I asked for a payoff amount, since half of what is owed is interest and penelties. They all say no, nor will they reduce the interest rate. (heck, they have a gold mine with me!) Anyone have luck with a letter asking creditors to take a lower payoff amount ?? I am caring for an ill son so i can't work, and my husband's job cut back so we are getting half of what we were earning. I don't want to do debt consolidation, since they tend to be a scam. If I can't negotiate a lower payoff amount, how can they?

Answer 1

If you own a home, a secured debt consolidation loan may be right 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. However, be careful before you borrow money against your home to pay off credit cards and unsecured loans; you are 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: http://www.bills.com/mortage/refinance

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. There are several drawbacks to CCCS, though. 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, 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.

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, though–they will significantly damage your credit 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 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, http://www.bills.com/debthelp to read more about these and other options available to you.

Answer 2

You are in a tough spot. My suggestion is to try to pay down the smallest card first and keeping up with the minimum on the others. Once the smallest is gone then go to the next card applying not just the minimum but also what you were paying on the other card as well.

I wouldn't give up on adjusting the payoff amounts with these companies. With your husband's work being cut back you have even more reason to go back to them. Work out a plan and go up the food chain until you connect with some decision maker. After all you have a very good reason for this call -- if they don't work with you your credit will be destroyed and they won't get anything! Tell them they need to work with you in their own best interests. A collection company will take 50% of what they collect!

Check out this link: www.crown.org You can email them with your question and someone smarter than me will answer you. They will help you walk through the whole process.

May God guide you through this whole difficult situation.

Answer 3

I know that congress was actually looking into this type of issue but I don't know that anything has been done about it.

Have you tried checking out Suze Orman's web site or her tv program? This actually sounds like a good question for her to answer.

What is your FICO score? This can also affect the interest rate charged. I know that part of your FICO score considers your debt ratio. If your FICO is low - then your going to have a heck of a time getting that interst rate down.

Do you own your home? If so - a home equity line of credit or second mortgage may have a lower interest rate. Then you can take out the loan and pay off your credit cards. Just be careful - don't get baited into one of those crazy hybrid, interest only, ARM mortgages.

Do you have a car that is paid off and is worth over 9000? Take your title to your bank and see if they will give you a car loan against it. I'd be careful of a title loan place.

Answer 4

Negotiating a lower payoff is a scam--they claim to reduce your debt and you pay a lower payment but what they do is wait for your accounts to fall into collections and make settlements with the collection agency's. They have extreme fees and they dont tell you that you have to claim that "settled" money on your taxes!! They are bad news.

I went with a debt management program. They did lower my interest--I was paying 29.99 on my Chase and they lowered the interest to 6%! That saved me so much alone--Even after I begged Chase to lower it or help me they wouldn't. They also lowered my overall payment amount to something that was manageable. I didn't see an end bc i was just paying and paying and nothing was going down on my statements. now i see that they are going down--i still get my statements each month which is good. Also, i thought my credit was going to be so bad bc the credit card company's closed out the accounts when i went on the program--but i must say--it has been so releiveing not having them open and able to be used and my credit is so good now. i monitor my credit bc i want to buy a house next year so i have seen the benefits.
I would check them out--i talked to a couple of company's but really liked the one i went with. they helped me with my budget and really seem to care! here is thier link
http://www.debtcounselingcorp.org

Answer 5

Get financial help from other people. I for one, like to transfer balances to a new card that doesn't have finance charge for a year, that's a year of no extra charges. Or you can file for bankruptcy but then your credit history is gonna be really bad, so just ask a professional in my opinion.

Answer 6

Look in the phone book in your area for Consumer Credit Counseling, or file Chapter 13 bankruptcy.

Answer 7

debt management is a very good option, you can't use your credit cards while on the program, but it keeps you in good standings with your credit and they stop the 30% interest rate.You should be out of debt in three years.Care one credit counseling I hear is very good. Good Luck to you.Happy Holidays.

Answer 8

Thats crazy.! Poor you. Not all debt consilidations are scams. You and your husband aught to find a good, trust worthy one and see how they can help.

Answer 9

since you are caring for an ill son, why not file for social security for him.
I am not sure how it works but it is worth looking into. My neighbor cares for her son and he gets a monthly check for him (about 500 bucks) sure it is not alot but each bit helps.
why not contact your social security office and see what they have to say