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1. Hope for the best
and do nothing
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Interest rates usually average over 18% and creditors can raise rates at
any time.
·
You'll
pay nearly 50% of your original balance in interest alone over the first
3 years. You are not making a dent on your principal balance.
·
If your
rates are 25% or higher, it is physically impossible to pay off your
debt by making minimum payments.
·
You
will take 20 to 40 years before becoming debt free with little room for
obtaining additional credit.
·
If
you've already stopped making payments, you are destroying your credit
while not eliminating any of your debt in the process.
2. File Bankruptcy
·
Both
represent a severe negative impact on your credit rating for 7-10 years.
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Can
cost up to $2,500 to file.
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May
have a negative impact on your employment status.
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In a
Chapter 13, you may end up paying 75 - 100% of your debts back
·
Will
eliminate all of your unsecured debt in a Chapter 7. May not qualify
with new bankruptcy laws.
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May
result in higher interest rates on future loans.
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Carries
a negative stigma, mental stress, and other burdens.
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Truly a
'last resort'. Bankruptcy should be avoided if at all possible.
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Chapter
13 completion rates average only 32%.
3. Use Consumer Credit Counseling
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These
companies are generally funded by the credit card companies themselves.
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They
are just another form of 'collection agency' to take your money
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They
will consolidate your bills into one monthly payment and lower interest
rates.
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Your
Balance will often take 3-7 years to pay down.
·
Pay
over 25% of principal balance in interest fees over the first three
years.
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You'll
end up paying back your full balance plus interest.
·
These
companies still charge a monthly 'donation', typically $20-$50
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Overall
fees over an average credit counseling program are equivalent to debt
settlement
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Negative marks remain on your credit report for up to 7 years.
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This is
also viewed by lending institutions as Chapter 13 Bankruptcy.
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The
average completion rate of consumer credit counseling is approximately
26%
4. Debt Consolidation Loans
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Need to
qualify first.
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Requires ownership of Real Estate property or a pledge of collateral.
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Home
Equity loan reduces future equity available in your property.
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Eliminates your credit card balances.
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Missing payments could cause you to lose your home or the collateral you
pledged
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A
transaction fee is usually required upon closing or built into the
interest rates.
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Payback
can be 10-20 years depending on debt balance and ability to pay back
loan.
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You
will pay back the full amount of credit card balances.
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Bottom
line: You are exchanging your unsecured debts for a secured debt - a big
risk.
5. Debt Negotiation and Settlement Program
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Rapidly
becoming the top method for consumers to get rid of problem debt.
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Negotiates based on your principal balance, irrespective of the interest
and finance charges your creditors are trying to add on your account.
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Independent companies not affiliated with your creditors.
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Charges
a fee to get started but offers financing options.
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Client's debt is paid off in anywhere from 15- 36 months depending on
cash availability.
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Will
receive an 'open delinquency' on your credit until debts are settled.
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Affects
credit much like debt consolidation firms except the settlement is
ultimately paid by the consumer directly to the creditor, unlike with a
consolidation company.
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Lowers
your debt to income ratio more quickly than Consumer Credit Counseling,
which represents a significant factor in your ability to quality for a
loan.
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You may
typically end up paying only 40-60% of your current balance.
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We
advise that before you enter another debt settlement program, you check
with the BBB and also see if the company is licensed, bonded and
insured.
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