High credit card debt is all too common nowadays. According to the
Federal Reserve, total U.S. consumer debt (not including mortgage debt)
reached $2.46 trillion in June of 2007. They also claim that the median
household income is $43,200 and the typical family’s credit card balance
is now close to 5% of their annual income. Unfortunately, because of
interest, less than 20% of every payment actually goes towards the
principle.
Sounds depressing. Do your monthly payments barely make
a dent in your balance? Are high interest rates, late fees, or over the
limit fees hindering you from really getting your finances under
control? Are you receiving collection calls? If you cannot maintain your
regular payments to your creditors or other unsecured debt and bring
down your balances, it’s time to take a hard look at your situation and
get help without filing bankruptcy.
Request a Lower Interest Rate
In
certain circumstances, a creditor will lower your interest rate because
you’ve taken the time to call and ask. Of course, they’ll evaluate your
account and look at factors such as how long you’ve been a customer and
payment history. Once you get a lower rate, the minimum payment will
also go down which will free up some money in your budget to either pay
other bills, or make larger payments where more money goes towards the
principle.
Debt Management Plan
A reputable,
non-profit credit counseling organization can save you money and piece
of mind. It’s their business to create a personalized debt management
plan and strategy to whip your finances back into shape. By negotiating
lower interest rates and lower monthly payments, you’ll have the money
in your budget to make your monthly payments on time, each month,
avoiding late fees and other fees that prevent you from paying down your
debt. You’ll no longer have to decide which bill to pay or which bill
to skip, which only gets you deeper into debt. All your unsecured debt
can be paid down in a systematic way each and every month. They can also
give you a good faith estimate on how long it will take you to
eliminate your debt-the light at the end of the tunnel! Plus, you’ll be
provided with educational resources to help you stay completely debt
free.
Consider this example:
Principal Balance Interest Rate Minimum Payment Interest Paid
$20,000 30% $695.00 (interest + 1%) $500.00
$20
,000 12% $398.00 $200.00
* Note: The actual interest rates and required minimum payments are determined by individual creditors.
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