michael99hop's DiaryLand diary

10:10 p.m. - 2010-06-28
Ridding Yourself of Credit Card Debt

Many of us have too much credit card debt. And, in todayis declining economy, many people are worried about how to pay their debts in the event of job layoffs or rising expenses.

Not being able to pay your credit card payments can be a big problem. Paying even a day late will cause big late fees. Your interest rates may go up if you pay late, too. Your credit rating will also be negatively affected by late payments.

Credit card debt programs and consolidation are two popular ways to solve your credit card debt problems. There are some differences between the two solutions.

Using a bank or home equity loan is the most popular way to consolidate debt. Use the money from the loan to pay off your credit cards, leaving you with one payment. The loan's interest rate will likely be less than that of the credit cards, so your payment will be less, saving money from the beginning. Plus, you'll be able to pay off this lower rate loan faster than the credit cards. But, be sure stop using the credit cards you've paid off. Otherwise, you'll have two payments. If you've already missed several payments, your credit may keep you from qualifying for a consolidation loan. It's best to consolidate early, before your credit rating is affected.

With debt settlement, you settle the credit card deals for less than you owe. The debt settlement company talks to your creditors. Once accepted, you will pay off only a percentage of what you actually owe on each card.
You'll now have just one payment a month to the settlement company. This payment will include all of your new monthly credit card payments, plus the fee for the debt settlement program. The debt settlement company distributes the money. This payment should be less than you were previously paying.

Debt settlement is not for everyone. Your credit rating will take a hit. However, your credit may have already been affected by your late payments. You may actually see your credit improve now that you can make your new, lower payment.

Now that you know how both solutions work, it's time to tackle your debt consolidation loan.

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