Consolidated credit

Consolidated Credit – Essential Guide to Consolidate your Credit Card Debts Consolidated credit services have seen an uprising in customers. In a time where jobs are sparse and average people are forced to choose between which bills are paid and which can’t be, the situation has become dire. While it’s true that Americans live in an instant gratification state of being, charging what we want now and worrying about paying it later, in recent hard economic times, even those who have had stellar credit histories for decades are struggling to make on time monthly payments. Consolidated credit card companies may be the solution.

Types of Debt It is staggering how many consumers who have debt don’t really understand what their debt consists of or how the paying off process works. The solution to the debt problem truly lies within understanding what debt you have first.

Credit card debt is the most burdensome of all debts and it is the most dangerous. This is mostly due to inflated interest rates and not understanding how your credit card APR and monthly interest rates work.

To find out what your monthly interest rates are, a simple mathematical formula is used. Take the APR rate and divide it by 12 (the number of months per year) and that will give you your monthly interest rate.

The issue that most people have to contend with when it comes to debt is that too many pay the minimum monthly payment on each of their debts: mortgage, student loans, credit cards and other debt responsibilities. This is a creditor’s dream and it is your nightmare. Let’s take a look at how this formula doesn’t work for the average consumer.

Let’s say you have a credit card balance of $5,000 and the interest rate on your card is 20%. The minimum payment due each month would be $133.00 and you pay that faithfully. At that rate, it would take you 277 months to pay the balance in full (if you don’t charge on the card ever again) and when all is said and done you will have actually paid a total of $7,723.43 in interest alone! Eventually you would see that the minimum payment would go down as the balance goes down, but few people still make the original payments which could actually decrease the amount they pay over time.

How Debt Consolidation Works Debt consolidation will only work for unsecured debt. It can be a life saver if it is used right. Essentially one who uses this type of service would gather all of their unsecured debt and work with a counselor to

combine all the separate accounts into one total amount and then make one payment per month, chipping away at the total balance.

Though there are many different kinds of consolidation credit loans, the three most common are:

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Unsecured debt consolidation loan-this is a personal loan that will allow you to consolidate all your debts and do so at a low interest rate. The lower interest rate means you will pay off the debt sooner and will probably be able to make higher payments each month. The problem that many run into with this is that you have to have a very good credit score to qualify for the low interest which would make this plan possible.

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Home equity loans-In this case you would put your home up as collateral to secure the debt payments. Since homes are a form of secured debt, using this method can secure you with a low interest rate; however it is extremely risky and should only be used if you know you can make your monthly payments. Not making the payments can result in losing your home which is why few credit consolidation counselors will recommend it.

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Debt management program-This type of credit consolidation is the most popular for several reasons. First, you don’t have to have top notch credit scores to qualify. Second, you are not putting anything up for collateral and therefore aren’t risking losing anything. With this program you would work with a debt specialist who will negotiate deals with all your creditors and attempt to get a lower payoff amount. The company then pays off those debts for you and you would then owe the total to the debt or credit consolidation company.

The counselor that you work with will combine all your debts into one easy payment which makes life a whole lot easier and the two of you can strategically come up with a payment plan that you can afford.

Other options for credit consolidation include credit card balance transfers which is simply taking one of your higher interest cards and transferring it to a lower interest card. These days however, those deals are far and few between and the bottom line is this method still may not solve your problems if you have a lot of debt.

There is also an option of debt or credit settlements which is working with the credit card companies to pay a lower amount than you owe. Of all the options, this one is the worst to consider because it places a black mark on your credit report which will remain there for a minimum of 7 years. Since so many things are reliant on one’s credit score, this could do damage that in the long run just isn’t worth it.

Consolidated loan for credit card companies will work with you to find a solution to your overwhelming problem however it is vital that you research the companies first, as some are better than others.