Is your credit card debt out of control
On June 24, 2008 in Business, General
Hello my name is Joe Sellers and I’ve been assisting those that are in debt with their credit cards for a while and understand the negative effects it has on someone’s life. When you have credit card debt and think that this matter is no longer something you can control, you would be smart to make a choice on what to do and make it quick. You should not put it off until it is too late. As many of you n already know is that the creditors are not co-operative when you call them with problems regarding you statements. It’s pretty remarkable the way it works because when you first obtain the card they are very polite people when you are speaking to them on the phone. Then if you contact them to dispute a late or over limit penalty fee and try to have it waived they treat you like dirt. It can be tough enough trying to maintain payments with 9.9% or even the 7.9 % interest that they are charging on your credit cards. How are you supposed to come up with the money for the higher interest payments now? This is the reason a lot of U.S. citizens are seeking out other options such as Debt Settlement vs Credit Counseling or even Bankruptcy. If you are not familiar with any of your options then I will offer you a little bit of an education on them.
Bankruptcy
Prior to 2005 bankruptcy was to be used for families who were fighting through serious monetary problems. Unfortunately it was misused by tens of thousands of debtors who were trying to evade paying their credit card debts. They didn’t want to be accountable for their actions. The credit card companies were sick and tired of this so they lobbied to have the bankruptcy legislation changed. It is now referred to as the Bankruptcy Abuse Prevention and Consumer Protection act of 2005. This would make it more difficult for many Americans to file for chapter 7 bankruptcy. Bankruptcy should only be made use of as your last resort option after you have explored every conceivable option. Also you should understand the consequences that might come back later down the road. You would have to hire a lawyer, go to court and that could cost you a lot of money. There is also the negative effect of it being on your credit report anywhere from 7 to 10 years. Also when you fill out any important application or document you will always have to answer yes when asked the question about bankruptcy, so this does have a long lasting effect on your credit.
You need to know
80% or more of the companies you see on TV, internet or hear on the radio are not the companies you will be working with. They are lead brokers that sell your info to other companies; this is why, when you call them they tell you someone will contact you back shortly. If you fill out the application over the internet you should get a call from that company that day or at latest the next day and not some other company with a different name. So you need to remember with who and where you requested the information. If it was over the internet make sure that is the company and that they are not going to sell your info to other companies, this way you don’t get flooded with calls from a bunch of debt settlement companies.
Consumer Credit Counseling
Everywhere you turn, either on TV or the radio, you will hear about consumer credit counseling. A credit counseling company will try to get the creditors to lower the APR on your credit accounts. You then make one monthly installment to the credit counseling company and they then pay each one of your creditors on your behalf. The down fall to this option is even though they lower the interest on your credit card balances you might still pay back as much as 135% of what you currently owe.
This is because with this sort of program you will still be paying back what you owe plus some of the interest for around 4 to 7 years. Almost eighty percent of the people that are in credit counseling don’t complete the program for missing as much as one payment. Another downfall to credit counseling is that if you have an income problem and are short on your monthly payment they will boot you off of the program instantly. They will also increase your interest back up and the creditor could keep you off the program for around one year and on some occasions even longer. This could put you right back to where you began, if not in a worse situation.
Credit Card Debt Negotiation (also known as Debt Settlement)
This is the method which can save you the greatest amount of money. A competent debt settlement company will save you at least 40% of what you currently owe. The 40% should include all the fees as well. Similar to credit counseling, you will hear a lot of radio and television advertisements quite often. These organizations are popping up everywhere across America. Some of these companies try to make it sound like they have a magic wand and are going to make all your debt disappear overnight. There are also some companies that try to use religion to acquire the trust of people. No matter what organization you are going to hire it is your responsibility to due diligence on them. You can always start with the BBB (Better Business Bureau). You will be able to uncover a lot about a company from them. If you realize that a company has only been in business for a short time and has a lot of complaints towards them, then you must stay away. One more thing to keep an eye out for is how long has the company been in business. Some organizations only make it one or two years before they get shut down or get caught stealing people’s money. Then some of them only stay around to earn as much as possible and close shop just to open up down the street with a different name and will continue to do this over and over.
You need to feel confident with the individual you are conversing with as well as the debt settlement organization. If they are really pushy and trying to get you to sign a document within the first 10 to 15 minutes of the call you need to be very careful. This is not a choice you want to rush into head first. Really, how can a company know they can assist you without reviewing your situation first? There are far too many organizations out there that only tell you all the positive aspects about their program. They tell you not to be concerned about a thing. This is a very easy procedure and nothing bad can ever happen to you. That is a load of you know what. It is not a very easy procedure and it is not right for every consumer. Some Americans still get taken by them because that company candy coated everything and did not offer them full disclosure. For many people credit card settlement can really get you back on your feet and out of debt in less than three years, while saving you thousands of dollars off your balance.
One more issue to remember is a majority companies earn all their charges within the first year and a half of the program. Now I will ask you this question, what reason will that company have to work out the best possible deal on your behalf if they know that they are not going to earn any more money? There is none! So you see, if an organization understands that why would they keep working on trying to get you a better settlement. This happens quite often. They really don’t care at that point. They take anything your collectors’ offer, in turn meaning you pay more. You will find Debt Settlement Companies that make their money the old fashion way, by earning it. Make sure they answer all your Debt Settlement questions. I hope this has offered you a better understanding of the varied options you have to becoming debt free. Thank you and have a good day.
Joe Sellers is a credit card debt analyst with the US Consumer Advocate, which practices in credit card debt settlement.