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Article by Brad Stroh

Consolidate Credit Card Debt

When managing your existing credit cards seems overwhelming, one effective way to ease both the financial and emotional burden of the cards is to consider the option to consolidate credit card debt. There are several ways to consolidate credit card debt, and there are many benefits that arise from the choice to consolidate credit card debt.

First, what does it mean to consolidate credit card debt? One way to consolidate credit card debt is to take out a new personal loan and use the proceeds to pay down your existing credit cards. Another way to consolidate credit card debt is to perform a balance transfer; this involves applying for a new credit card which will allow you to transfer all the balances from your existing cards onto this one new card.

Both of these methods to consolidate credit card debt involve opening an additional unsecured credit account. Another alternative to consolidate credit card debt is to look into borrowing against your home equity. One way to do this is to take out a Home Equity Line of Credit (HELOC), which is credit line against the equity in your home. You would then use the proceeds of this to pay down all of your credit cards. Another way to take advantage of the equity appreciation in your home to consolidate credit card debt is to refinance your existing mortgage. As part of this refinance, you would use some of the proceeds to pay off your existing credit cards. This type of refinance is often called a debt consolidation refinance – you are consolidating both your old mortgage and your existing credit cards into one new mortgage.

Now that you understand how to consolidate credit card debt, it is important to understand the benefits of this strategy.

*Lower Interest Rate: Perhaps the most significant benefit that results when you consolidate credit card debt is that the new account that you are opening will carry a lower interest rate than the rates on the credit cards that you are paying off. This means that it will cost you less over time to pay off your debt. If your credit is strong enough, you may even qualify for a 0% balance transfer, which means that you will not have to pay interest charges on your debt for a set period of time. Moreover, a secured loan (e.g. mortgage refinance, HELOC, etc.) will generally have a lower interest rate than your existing credit cards.

*Faster Repayment Period: Along with saving money over the long term by lowering your interest rate, you will also more than likely be offered a lower monthly payment. This may be very attractive given your current financial situation. However, if you are able to maintain your present monthly payment amount after you consolidate credit card debt, you will be able to pay off the new balance much more quickly than you would have with the old credit cards.

*Ease of One Bill: Another very important benefit that comes with choosing to consolidate credit card debt is the simplicity of having one monthly bill that comes with the new account that you have opened. With multiple credit cards you are receiving multiple bills, more than likely with different payment due dates throughout the month. Not only is this difficult to keep track of, it also increases the likelihood that you will miss a payment and end up paying late fees and incurring higher interest rates. It is easy to see how one monthly bill can lower your stress level considerably!

These are just some of the many attractive reasons to consolidate credit card debt. Be sure to examine all of the financing options available to you before deciding on the right one. You may be eligible for a loan or credit card with very low interest rate relative to what you are paying.

Article by Vicki Hall

There’s no way out of debt completely. Of course, there are consumers who cut up their credit cards, own their homes free and clear, and don’t have any outstanding debt. Today, that is a very rare situation. The economic crisis seen in the United States in recent years has created mountains of debts for the average person, and many of them have sought relief through various resolution programs.

In several types of debt resolution, a certain amount of relief debt is incurred. When a type of program is undertaken that requires a loan to pay off bills, it is known as relief debt. It is essentially trading one kind of debt for another. Relief debt replaces debt that is owed to many creditors, and rolls it into one tidy sum to one creditor. This is usually a bank or another financial institution, who carries the note.

Through negotiation, creditors agree to settle for lesser principal amounts and decreased interest rates in lieu of being paid off. To do this, the consumer takes out a secured loan against hard collateral such as a home and an automobile. For the person who still has a mortgage, this means there’s then a second mortgage against his home, but incurring relief debt is also a way to satisfy creditors and start a path to financial recovery.

Since relief debt consists of a loan, the consumer, who asks questions and does their homework stands the best chance of making a sensible decision. The most basic question should be whether the loan will have to be secured or whether it can be unsecured. If the loan is secured, count on being a second mortgage on the home if the amount is very large at all. Secondly, if the consumer has a high debt to income ratio, there is a good possibility of finding a loan hard to even get. The consumer needs to consider how much the monthly payment will be, the total cost including interest paid over the years, and how such a loan and repayment program will effect their credit rating.

There are a number of credit resolution programs other than taking out a loan. Debt management and debt relief are two of them, where loans are not require. The end result is the same – bills get paid off – but the approaches are different. By working with a reputable debt relief company, it may be possible to take another approach and avoid a loan and subsequent relief debt. Most consumers prefer to look at all of these options in lieu of declaring bankruptcy, and it is a very wise idea.

The billion package included in President Obama’s Homeowner Affordability Plan aims to reach up to 3 to 4 million homeowners struggling to maintain their mortgage payment obligations due to the current recession. The plan proposes to systematically lower the monthly mortgage payment down to 31% of your gross monthly income by reducing the interest rate imposed on the loan and extending the life of the loan.

If you are struggling at this time with an unaffordable mortgage loan and are afraid you might lose your home, this must be good news. Not only this, even if your lender has turned down your application for mortgage modification, you are given the opportunity to request to be considered for this package. But one question arises: How do you qualify to take your share of the package?

First, you must be a non-delinquent borrower. Remember that the package has been designed with eligible homeowners in mind, with those doing their best to keep their mortgage payments current in spite of their financial hardship.

Second, you need to be able to prove you currently occupy your home as your primary residence. Third, if you are a borrower with high total debt level, you must be willing to undergo HUD-certified consumer debt counselling.

Furthermore, your mortgage balance must not be more than 9,750.00 by the time of your application. You must also be able to show that no less than 31% of your gross monthly income goes to your current mortgage payments (inclusive of taxes and insurance). Also, the loan must have been initiated before January 1, 2009 and insured by Fannie Mae or Freddie Mac.

You will therefore have to prepare sufficient documentation to prove that you are qualified as you will have to submit yourself to a full disclosure process.

This includes your proof of income and expenses along with a completely filled mortgage modification form. This must be done with care and diligence if you are to get your share of the President’s mortgage modification package.