What is the best way to deal with credit card debt? Consolidate or Credit counseling company?

Just had a major surgery and racked up some major credit card debt while being out of work. Just looking to see where I could start now that I am going back to work.

What is the best way to deal with credit card debt? Consolidate or Credit counseling company?
If you are able, take out a home equity loan. Pay off the credit card bills with the proceeds. Then pay off the home equity loan as quickly as possible. This is a win-win situation. You get the credit card bills paid off, plus the interest on the home equity loan is a tax deduction.





Or, you could line up the credit card bills by 1)interest rate, 2)highest amount owed to lowest amount owed, or 3)lowest amount owed to highest amount owed. Whatever way you line them up, start paying them off.


I preferred the lowest amount owed to the highest amount owed. I paid the most money to the lowest balance, then paid the remaining bills just above the minimum required. As the lowest bill was paid off, I then applied that same amount plus the minimum to the next highest bill. As that bill was paid off, I then applied that amount plus the minimum to the next bill, etc.


Now Susie Orman would disagree with this method, but I found great satisfaction in seeing the bills disappear more quickly than if I had paid off the highest interest rate bill (regardless of balance) or the highest balance bill first. Plus, I think when you have big bills hanging over your head, you need to see progress as quickly as possible. It really gives you a boost to see those bills drop off the face of the earth.





Good luck!
Reply:Pay it off as fast as you can. Sometimes you can kite it for a while. Convert it to a mortgage is sometimes cheaper interest and tax deductible. You don't sound like you need counseling . Consolidate only if you can get a cheaper interest rate including fees.
Reply:Consolidation is the best solution available to the credit cardholders to improve their future credit. People go for debt consolidation for many reasons: prolonging the loan period from 5 - 15 years and reducing the interest rate. Consolidation allows you to go for a loan with lower interest rate than the one you are currently paying. Besides it simplifies the loan repayment as you are paying only one lender in place of various payments to different lenders.
Reply:I recommend to see a credit counselor to find a best payment option for your financial situation.





For example: Some people took out an equity loan for their house to pay for their credit card debt, however it also caused to lag in payments when the equity loan interest increased. Why lose your house over a credit card loan? So, I suggest go to a reputable credit counselor or financial manager.
Reply:I'd recommend credit counseling. See what they have to offer. Have you tried to contact each creditor individually to see if you can make different payment arrangements or if an interest rate can be lowered to lower your payments. A lot of times creditors would rather work with you than lose money. If the credit counseling doesn't provide any sound advice, then try debt consolidation...but be wary of some of the places that offer this service.
Reply:Debt managers cant do anything for you that you can not do for yourself. They only mess up your credit even more and charge you for it.





Additionally, since collectors and creditors have not obligation to even discuss the account with your credit manager and your credit manager can not stop creditors and collectors from sueing you or calling you directly...whats the point?





You need to do it yourself my friend. Go to www.annualcreditreport.com and get a free credit report. You can do that right now. Check out your debts and start with the ones that want to sue you first. Before anything starts. Call them and begin to negotiate. I know people say bill collectors or agents are horrible but that is not always the case. Maybe in some cases but we dont all bite. I promise. (wink)





Look...the best time to negotiate debts is at the end of the month when they are frantic to meet their quotes.





The best way to go about it is to take it one creditor at a time. Make a deal and begin to settle. Start by offering 30% on credit bills and 15% on medical bills. The collector will start working the number up and negotiating. Give them the story that you are broke but dont lie to much as they have means of checking and it might upset them than they wont be open for such negotiations. Once you have a deal than its a deal and be sure to get it in writing before you pay anthing. At the same time try and make them throw in there that they will delete it off your credit report. Most of them will say pay all and I will others may agree. Make sure that is in writing as well. Some collectors may even accept your settlement in a couple of payment if it is too large for you to make. Naturally they will try and up the limit as much as you can but once you reached your max than put your foot down. If they dont take it at that moment...they will call you back when they are catching heat from the boss for not puting enough $$ into his piggy bank. Trust me.





If you can not afford to make settlements than call them and negotiate a payment plan with them that you are comfortable with and know you will not default on. If they ask you to sign a payment plan agreement. Be sure its not a stipulation of judgment. Whats that?? Its a legal doc that says if you default they can submit it to the court and get a judgment against you without even bothering with litigation.





Make your payments and your home free.





Be sure not to request validation on accounts that you know are valid. If they are and the collector knows they are...it may make them think your taking them for a fool or trying what they call a "stall tactic". Than it might upset them and make the pull the trigger and have you served right away. You dont need that!!!





But if you see something on your credit report that is not valid. File a dispute with all three major credit reporting bureaus and call the collector and ask for validation.





Good Luck

lilac