Credit Card Debt Consolidation Tips & Advice
Financial Tuesday, October 5th, 2010A credit card debt is an unsecured debt. When the company gave you a card, they took a risk and, like every other creditor of unsecured debt, they will end up having to accept your terms. Do not in any way be persuaded to turn that debt into a secured one. There are several ways. One is they could ask for a charge on your property in return for a very low repayment and that should be refused. Secondly, they may try to persuade you into a taking a consolidation loan. They are widely advertised as reducing your debts into one manageable repayment and many card companies now offer these loans. They should also be avoided. Thirdly, some people may be tempted to re-mortgage their homes for the overall amount of several small debts in order to pay them all off in one go. This amounts to the same thing as securing the loan and should always be avoided. Do not be tempted to borrow money against the security of your home in order to pay off unsecured debts. You don’t have to, so don’t do it.
There are several reasons why not to do any of these things.
1. If the debt is unsecured, you hold the advantage, not the credit card company. They cannot force any repayment if you do not have the money to make a repayment with.
2. Consolidation Loans secured against your property means they can ask a court to repossess your home and reclaim their debt at any point in the future if you don’t meet the new agreed repayments, and that gives the card company a major advantage.
3. If you stand your ground and force them into agreeing a small monthly repayment schedule, they will forget all about you. It gives you the opportunity of going back to the company in a year or so and informing them you have come into some money and want to make a small one off payment to clear the debt altogether. Many companies will accept a one off payment of considerably lower than the full balance, rather than continue having the larger debt being paid off at an interest free rate $5 per month for 30 years or so. But you will not be able to make such an offer, and clear the debt completely at a later date if the loan is consolidated or secured against your property.
4. Finally, some Credit Card companies, especially Gold and Platinum ones, have built in unemployment and sickness insurance attached to them. If you are sick or have become unemployed, you may find yourself drawing up to $1,000 in insurance payments for a year, clearing your card debt.
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Posted by Kevin Huffman
on Oct 5 2010. Filed under Financial.
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