The more active credit agreements in existence, the more difficult managing debt becomes. Combine this with the growing amount of money that consumers now owe and getting help with credit card debt and unsecured loans has never been more important. According to the April 2009 Nilson Report, the cumulative amount of unpaid charge card debt for all Americans was a staggering $972.73 billion. The crippling rate of interest and charges mean that it is necessary to find a suitable way to manage or pay off debt as quickly and efficiently as possible.
Managing Debt Problems
There are a number of effective sources of help with credit card debt and unsecured loans, including a debt consolidation loan, debt relief program and/or a zero percent balance transfer. The best strategy to manage debt will depend heavily upon the individual's credit history. A low credit score means that access to new sources of borrowing may be restricted which could mean that a debt management plan or debt settlement program will be the most effective options.
Pay Off Debt with a Zero Percent Balance Transfer
Managing debt can be achieved through a series of 0% credit card balance transfers. Although there is typically a transfer fee of 4%, the consumer can pay off debt far more quickly than would normally be possible. This is because a larger percentage of each monthly payment goes towards clearing the balance rather than just paying off interest. Introductory rates typically last about 12 months. Once a deal comes to an end, it may be possible to perform a further zero percent balance transfer.
Managing Debt with a Debt Relief Program
- Debt management plan. The objective of this debt free solution is to improve affordability. This is achieved by making a single payment to an intermediary each month until the full balance is completely cleared. The management charge is typically 15% of each contribution.
- Debt settlement program. A consumer could reduce the amount owed by up to 50% and clear the remaining balance over a period of up to 36 months. This debt relief program is normally used to clear larger debts as an alternative to filing for bankruptcy.
A Debt Consolidation Loan to Help with Credit Card Debt
It may be possible to take out a loan to clear existing debts and instead make a repayment to just the one lender. A loan to consolidate debt not only simplifies finances, it could also reduce debt repayments. Whether this is the right option will depend upon the borrower's credit rating and if they are a tenant or homeowner with sufficient equity. A poor credit rating will mean a higher APR.
Choosing an Appropriate Strategy for Managing Debt
A struggling consumer could pay off debt with a zero percent balance transfer, debt consolidation loan, debt management plan or a debt settlement program. Personal circumstances will dictate which is the most appropriate option, but the borrower's credit score is undoubtedly the most important consideration. This is because the lower the individual's credit rating, the more expensive it is to borrow money. A bad credit rating will rule out a balance transfer or unsecured loan to consolidate debt.
Sources
" Credit card statistics, industry facts, debt statistics." CreditCards.com.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
Comments