Eliminate Your Credit Card Debt, But How?
November 16th, 2008 | 
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Can a debt consolidation loan eliminate your credit card debt?
A consolidation loan might (or might not) be the key. There are
several things you must consider when making the choice to
consolidate debt using a debt consolidation loan.
First, is a debt consolidation loan your best choice to
eliminate or substantially reduce your debt? There are other
options available to you, including credit counseling and
bankruptcy. Obviously bankruptcy is a last resort. You must
examine several factors when making your decision on which debt
reduction / elimination strategy to use. You need to get information on debt consolidation to make the correct
decision. â¢How much outstanding debt do you have?
â¢What is the interest rate of your current debt? Many credit
cards have interest rates of 14% – 22%, depending upon your
credit rating and payment history. Obviously, the higher your
current average interest rate, the better off you will be if you
consolidate your debt with a consolidation loan at a much lower
rate.
â¢How much of your outstanding debt is unsecured? Unsecured debt
has no collateral against it. Credit cards, student loans, store
charge cards and medical bills are examples of unsecured debt.
If you have over $7,500 in unsecured debt there a multitude of
lenders that you can look at. Student loans fall into a
different classification from other types of unsecured debt. In
the United States, most are backed by the federal government.
Usually you will have to use a secured debt consolidation loan
to pay off your unsecured loans. You may also be able to
refinance your secured debts, but you usually cannot consolidate
secured debts.
â¢Do you own a home or other substantial assets to use as
collateral for a debt consolidation loan? If you own a home or
other real estate, how much equity do you have in it?
â¢What type of interest rate is available to you for a
consolidation loan? The interest rate you receive on your loan
is affected by a multitude of factors including the prime rate.
For student loans, the borrower interest rate on consolidation
loans is currently calculated as the weighted average of the
interest rates in effect on the loans being consolidated,
rounded up to the nearest one-eighth of 1 percent. They are
capped at 8.25 percent.
â¢How is your credit rating? Someone with a very good credit
score has options open to them that those with lesser credit
ratings do not.
Keep in mind that if you have more than 20% equity in your home,
you are usually not required to carry private mortgage insurance
(PMI). If you have reached the 20% equity stage through either
paying down the principal, asset appreciation, or both, you can
probably drop PMI and lower your payment. On the flip side, if
you are not paying PMI and you take out a consolidation or other
home equity loan, you may put yourself back under the 20% equity
threshold. This would require you to get a new PMI policy.
Factor this in when making your cost / benefit analysis.
If you are constantly slipping backward and your cash flow is
poor, you can improve things with a debt consolidation loan. Be
careful and weigh your options carefully. Take into account the
tax benefits you may receive by using a home equity loan to
consolidate your debt. This benefit will vary depending upon
your tax rate. You can get many free quotes for debt
consolidation loans. There are several places that have multiple
lenders compete for your business. Talk to several lenders to
see which will give you the most favorable terms. You can
substantially lower your monthly payment and significantly
improve your cash flow situation with a debt consolidation loan.
Just make sure this is the right choice for your needs.
Posted in eliminate credit debt
Can you eliminate credit card debt by declaring bankruptcy?
Can an individual eliminate credit card debt by declaring bankruptcy? I didn't think you could wipe it out, just get the bill collectors off your back. But, someone told me that it depends on which chapter of bankruptcy you use. The right one WILL eliminate credit card debt. I know someone who has $80,000 in credit card debt and they are trying to do that to get rid of that debt! Is it really possible? Are there any restrictions in doing this. Can you ever get a credit card again if you do it?
If you file bankruptcy to eliminate all debt, do you have to give up ALL of your possessions? Will you have anything left?
This is for a friend of mine (really). They don't own a home. They have 2 cars and some furniture and A 401k plan. Between the two of them they make about $40,000 a year. I don't see how debt consolidation will help them How could they EVER pay off $80,000!?! They had a house but they used up all the equity in it over the years and sold it recently and broke even on the deal, ending up with NOTHING! What a mess! I just didn't think they could wipe out their credit card debt! And, it really isn't fair to the rest of us that pay our bills!
hey before you do that, pls be guided by this resource
References :
http://www.newhorizon.org/Info/credit-improvement-articles.htm
Bankruptcy can eliminate all debt including credit card. The court looks at your circumstances and decides whether you are eligible to file Chapter 7 or Chapter 13. In some cases, Chapter 13 pays every penny back.
Bankruptcy stays on your credit report for 10 years. It will affect all sorts of things in your future,including some jobs. You will have to pay high interest on any kind of loan. It is not an easy way to get out of your debt.
References :
There are a number of factors involved.
A chapter 13 is where you have to pay back some of the debt. How much depends on what your current disposable income is and how much your debts total. There is a fairly complicate formula involved. But this will stop them from filing judgments, garnishments or liens. It freezes interest and late fees. And it protect your property if you own a home or car.
A chapter 7 is called "liquidation" for a reason. You may have to give up most of your property. Therefore, if you have a lot of property along with that 80k in credit card debts, you may have trouble keeping it all.
Also, you must pass a "means test". This was put into place to prevent someone who has a very good job from filing BK and dodging their debts. If you earn (generally) over $45k a year you will not qualify for Chapter 7. Again..there is a complicated formula to figure this out.
There are a lot of bankruptcy lawyers who have a free consultation. If you think it's necessary talk your situation over with them.
References :
Yes, credit card debt is dischargeable in chapter 7 bankruptcy. The court will seize all your assets, liquidate them to pay off as much of the debt as possible, and discharge the rest. The only assets that are exempt are the necessities of life, such as clothes, food, a small amount of equity in your home and car, etc. And it will be very difficult to get a credit card for at least 5-10 years after bankruptcy.
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Donot go for bankruptcy it will stay on your report for another 7-10 years so be careful about it.You can consult with a debt consolidation agency but all are not good . Try to get some who are BBB online registered organisations and are member of US chamber of commerce and then apply online and get their help. They will help you to fix your credit and also relief you from the debt.
To know more you can visit
http://www.debtconsolidationmanagement.blogspot.com
and
http://www.creditcardbiz.blogspot.com
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