Millions of people in the U.S. are overwhelmingly struggling to get out of debt. Many see debt consolidation as the most feasible debt relief option. It is true that debt consolidation can merge multiple unsecured debts into a single, more affordable debt repayment. This debt management strategy is essentially achieved by getting a low interest loan or entering in a debt repayment plan. But, the debt consolidation approach may not be the best approach for a number of financial situations.

The following tips will also help you determine whether if debt consolidation is suitable to your financial needs:

1. Before trying debt consolidation, verify the APR charge on your most recent credit card statement. If the interest rate is too high, approach the credit card company and ask them if they can lower the interest rate. Generally, credit card companies will consider lowering the interest rates if the cardholder shows an excellent payment history and has only used up 30% or less of their credit limit. But, if you’ve maxed out your credit line, negotiating with your credit card company will be a futile effort.

2. Before applying for a debt consolidation loan, see whether the average interest on your outstanding balances is at least 6% higher than the interest on the prospective consolidation loan. Note: if the interest rate reduction isn’t high enough, the new payment plan will barely make a dent on the existing credit card minimum payments.

3. To determine if you can afford to make the new debt consolidation loan payments, make a list of your income and expenses and see how much of your income can be applied toward the new monthly debt repayments.

4. Determine the duration of the prospective debt consolidation repayment. There are many online financial calculators that you can use to calculate the term and interest charges of the new repayment plan.

5. Compare the services offered by different debt consolidation companies. Before you hire a debt consolidation company, verify their fees as well as what they propose to lower your interest rate charges. This will determine your new monthly payments and the duration of the debt management plan. Some companies charge a monthly fee based on a percentage of the new payments being remitted to the credit card company.

6. A less consolidation option is to take out a home equity loan. This loan approach can pay off high interest debts via a much lower interest rate. Plus, the interest payments on a home equity loan are tax deductible. However, there are a number of variables to digest when trying this option. First of all, you must own a home with a great deal of equity. Secondly, the interest on the home equity loan must be substantially lower than the interest on your credit card accounts. Finally, you need to calculate the duration of the home equity loan repayments against the remainder of your credit card minimum payments. If the potential savings of the loan aren’t significant, it’s not worth the risk, for if you miss a loan payment, your home can go into foreclosure.

Wikipedia is another fine source to research the above topic as well as a Debt Free League financial adviser. You can call them at 1.800.213.9968 and for no cost, they can explain to you the “pros and cons” of debt consolidation and other debt relief options.

By Vic Chevalier

Being delinquent on credit card debts is no laughing matter. The endless annoying collection calls, torturous threat of lawsuits, and fear of bankruptcy can create many sleepless nights. But, a debt negotiation agreement can take away a lot troubles. The following statistics explain why so many people are opting for a credit card debt settlement letter via this superior form of debt elimination:

● Many consumers and small business owners live unconsciously enslaved to their revolving debts;
● “About 51 percent of the U.S. has at least two credit cards” according to Experian;
● “Americans pay each year approximately $20.5 billion in card fees alone”, declares industry consultant. R.K. Hammer;
● “Credit cards are the most common source of financing for the small business community”, states the National Small Business Association.

Fortunately, a debt negotiation agreement can get you out of the monstrous debt trap. It also beats credit counseling, which only reduces interest rates. In contrast, a good debt negotiation can drastically reduce your credit card balances. There is magical ingredient. The remarkable debt relief is based on real numbers and averages as you’re about to see…

When Credit Card Companies Lose Billions – You Win!

Each year, well over one million bankruptcies strip billions of dollars in profits from credit card companies like Chase, Capital One, and Discover. Additionally, each quarter banks charge off about $20 billion in outstanding credit card balances.

Capitalizing on the above deficiencies, a debt negotiation agreement helps creditors recover funds they might lose if you declare bankruptcy or stop meeting your financial obligations. They can also collect more money than having to pay as much as a 40% commission to a collection agency. And what it means for you is ultimate peace of mind! No more debts. No more bills. And no more need to file bankruptcy.

Next, we will discuss the mechanics between the debt negotiation agreement and the credit card debt settlement letter…

The Debt Negotiation Agreement

The debt negotiation agreement is basically an accord between you and the credit card company to reduce a delinquent balance. This reduction permits you to pay less than the full amount of the debt as “payment in full.” For example, if you owe a $12,000 balance, they may accept $6,000 as a full payment.

The debt negotiation agreement initially manifests from a verbal negotiation or debt arbitration. The fruit from the negotiation is a written settlement offer from the creditor known as the “credit card debt settlement letter.”

The Credit Card Debt Settlement Letter

The credit card debt settlement letter is commonly referred to as the “settlement offer.” This settlement letter is a written confirmation from the creditor addressing the terms of the finalized settlement. To reap the rewards of their settlement offer, you must remit full payment of the settlement.

A word of caution: If you fail to pay the settlement by the date specified on the settlement letter, the credit card company will void the settlement offer and demand immediate payment of the original balance. Thus, to avoid sabotaging a good settlement arrangement, you must clearly follow the payment instructions on the settlement letter.

(Note: You can Google some great examples of debt settlement letters.

Keep Records of the Settlement Letter for Your Protection

It is important that you retain a copy of the credit card debt settlement letter with proof of the settlement. This way, if in the future the creditor or any collection agency claims that you still owe the debt, which happens regularly, you can show them proof that the debt was paid.

Another reason for keeping copies of these records is that the credit card company must contact the credit report bureaus so that they indicate on your credit reports the debt was settled and brought to a “zero” balance. If you find that this information is not on your credit report after sixty days from the date of the settlement, you should immediately mail certified proof of the settlement to the credit report bureaus to have the issue corrected.

The Term Settlement Letter

Now, let’s examine another type of letter, the term settlement letter. In lieu of a lump sum settlement, the credit card company may accept a “term settlement.” This would produce a term settlement letter, which helps you extend the debt repayment period.

A term settlement allows more time to pay off the balance, but it also generally weakens the settlement offer. For example, on a $5,000 card balance, the credit card company may agree to spread the debt repayment to two to six months. However, instead of asking for a lump sum $2,000 settlement (40% of the balance), they may ask for $3,000 (60% of the balance).

Another issue is that you must ensure to make every scheduled payment on the term settlement letter. Otherwise, if you miss a payment, the settlement offer will be off the table and you will need to repay the entire outstanding balance.

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