Debt Consolidation Loans » Credit Card Debt

A Warning About Making Minimum Payments On Your Debt

Shaun Connell — Fri, 03 Dec 2010 21:16:12 +0000

If you haven’t heard it before, you’re long overdue: Making the minimum payments on your debt is a bad idea. For years, consumers had no idea just how much it cost to make minimum payments on debt. Before the internet and the days of online credit card payment calculators, you would have had to be a mathematician to figure out the cost of minimum only payments.

Minimum Payment Warnings on Your Billing Statement

Things are different now. A recent change in law requires credit card companies to put a minimum payment warning on the front of the billing statements they mail out. This warning must state how long it will take you to pay your balance making minimum only payments and how much you will end up paying back on that type of payment plan.

Example of Minimum Payment Payoff and Interest

For example, if you have a $5,000 credit card balance at 14% interest rate, it will take you more than 11 years to pay off that balance with minimum only payments. You’ll pay a total of $2,880 in interest during that time. If you increased your payment to $170, you could pay off the balance the balance in less than 3 years and save more than $1,700 in interest charges.

It makes great financial sense to pay more than the minimum whenever you can, especially if you’re actively working on getting out of debt.

Are Minimum Payments Ever Ok?

There are some times when making the minimum payment makes more sense.

When you can’t afford to pay more. If you’re struggling to make ends meet, it’s more important at that moment to keep your lights on and to keep food on the table than to pay off your credit card balance. Continue to make your minimum payments. Otherwise, you’ll rack up late fees and it’ll be extremely difficult to get caught up.

You’re doing a debt snowball or other type of debt repayment plan. These types of repayment plans usually require you to make a huge lump sum monthly payment to one of your debts while making minimum payments on all your other debts. It’s ok to make minimum payments in that case because you’re planning to knock those debts out soon anyway.

When you’ll be penalized for paying more. With certain types of mortgages, you’ll pay a penalty if you pay off your balance too soon. It’s rare that you’ll encounter such a situation with a credit card balance.

In any other situation, send more than the minimum to get rid of that credit card balance sooner and save money on interest.

What’s So Bad About Credit Card Debt?

Shaun Connell — Thu, 02 Dec 2010 21:59:57 +0000

When you hear or read about the dangers of being in debt, you’ve probably noticed that credit card debt is singled out from all the different types of debt. Student loans, auto loans, and mortgage loans seldom get the amount of attention that credit card debt gets. There are a few reasons for this.

There’s no fixed repayment period on credit card debt.

Student loans and car loans are installment debt. They have a fixed repayment period between 5 and 20 years, depending on the loan amount and your monthly payments. If you keep making your payments, you’ll eventually pay the balance.

Credit card debt is revolving debt, meaning you can reuse the credit limit repeatedly and possibly never repay the balance. The minimum payments on credit cards are often so low that it would take years and lots of interest to finally repay the balance.

Credit card debt costs more.

Interest rates on credit card balances are higher than other types of debt. So, if you’re not paying your balance in full every month, your cost of borrowing is well beyond that of your other debt obligations. It gets worse as your balance gets higher and when you make minimum payments. The money you pay on interest could be going toward other debts, retirement, or other savings.

If you make a late payment on a credit card balance, you’ll have a variety of penalties – late payment fee, negative mark on your credit report, and a higher interest rate. Late payment penalties apply for other types of debt too, but usually not the higher interest rates that make debt harder to pay off.

Credit card companies can change the rules.

The recent Credit Card Accountability, Responsibility, and Disclosure Act puts a lot of limits on how and when credit card issuers can change your credit card terms, but the fact remains that they can still make changes to your credit card agreement. These changes can make it more expensive to pay back your credit card balance. That’s not the case with many other types of debts. When you sign up for a loan, the terms are spelled out and they usually don’t change the duration of the loan.

You don’t remember what you’re paying for.

When you send a mortgage payment, you know you’re paying for the roof over your head; the car payment is for the vehicle you drive; and your student loan payment is for your education. But what are you paying for when you send your credit card payment?

Because you can buy so many different things on your credit card and pay the balance at your leisure, you probably don’t remember exactly what you’re paying for. So paying back credit card balances becomes a chore. You can’t appreciate sending money to the credit card company because you don’t know what you’re paying for. And that negative emotion causes many people to delay paying back their credit card balance, which only makes it harder to pay the balance.

Credit cards themselves aren’t bad when you use them responsibly. That means paying your balance on time and in full when an interest rate applies to your balance.

Why Being In Debt Causes You To Pay A Higher Interest Rate On Loans

Staff Writer — Thu, 30 Sep 2010 00:51:46 +0000

There are many negative repercussions from being in debt and they can last for multiple years. One thing especially problematic for debtors is their inability to qualify for loans with reasonable rates of interest. Some are in such bad financial situations that they do not qualify for any loans, while others can get only loans with exorbitant interest rates.

Potential creditors view the fact that an individual is in debt as a negative situation. The individual represents a credit risk due to his or her inability to manage finances. Some creditors will make loans unattractive by offering only those with extremely high interest rates. This often results in very high monthly payments, making the loan infeasible for the individual.

There is another take on this situation when one considers revenue. Creditors make money from the interest they charge to borrowers. If a creditor sees that a borrower is in debt but not so far gone that chances of repayment are not good, the creditor may charge a high interest rate to pad its pockets. The creditor is relying on the fact that the individual will not pay off the balance in full.

This is not a very nice way to view creditors but in some cases, it is accurate. A desperate individual will take the loan with a high interest rate rather than no money at all. If the balance is not paid in full, that means interest payments, more money for the creditor. If a payment is missed, a late fee is included, again providing more money to creditors.

In this way, being in debt cripples an individual and the best way to resolve this is to pay off the outstanding debts. The person can then apply for a loan. Approaching things this way may result in a more favorable interest rate.

How Credit Cards Destroy Your Personal Finances

Shaun Connell — Sun, 30 Aug 2009 16:20:13 +0000

There are many way’s that credit cards can destroy someone’s life and destroy it quick. Credit cards are good people think but when they get maxed out and the payment get’s in the way of your regular monthly bills then you have a problem. Credit cards can be dangerous and harmful to you and your family. When you decide or even if you don’t decide to get a credit card this will make or break you.

My advice on a credit card is if you don’t need it don’t get it. I really don’t think that anyone needs one because of the barron that it puts on families today. Families are living off of credit cards today and that is why we are seeing so many forclosure’s, Bankruptsy and things in that nature. I personally have had credit cards and don’t think that i will ever have another one for many reasons.

When you get behind with a credit card company they are going to make so much money off of you that you will never be able to get caught up. You may get caught up but i guarentee that it is gonna cost you ten times as much to get caught up. Yes everyone today gets behind on something. That is life and we just have to deal with it.

So before you go and get or send out for a credit card you need to ask yourself a few questions am i going to be able to afford this or is this going to damage my life. You alway’s want to do everything that you can do to make it easier on you and your spouse or better yet even yourself. Remember credit cards can be a good thing for some people but i would say eighty percent of people that have a credit card are in trouble with it because of the way the economy is. Alway’s play it smart never let something like a credit card ruin yours or someone else’s life. There will be times to where you can’t help but to charge something But if you do just alway’s make sure that you make your payments on time.

How to Get Debt Free

Shaun Connell — Sun, 30 Aug 2009 16:16:20 +0000

Have you been trying to figure out a way to repair your debt? Do you have a lot of debt, but not enough debt to qualify for credit counseling or bankruptcy? That is okay, because you are better off if you stay away from bankruptcy and credit counseling. Sure, credit counseling is god and all, but it takes a long time for the credit score to be repaired. Bankruptcy is an option for people who are in debt, but this is the last choice you should make. It will ruin your credit and your self esteem, for years. How about getting a debt consolidation loan to get debt free?

Debt consolidation loans are a great solution for people who are in debt. You not only get debt free, but you can get extra cash in your wallet when the loan closes. Your bills will be paid fast, the loans are processed fast, and your self esteem and dignity will be great. Why spend years waiting for creditors to get paid, or years waiting for a credit score to go back up? Debt consolidation loans were made to help people get debt free, quickly, painlessly, and graciously.

In order to get debt free with a debt consolidation loan, there may be some qualification requirements. They usually will go by your income. Of course, you will need to be 18 years of age or older. As far as your credit score goes, there are companies who will give you a loan no matter what your credit score is. If you own a home and have equity in the home, you could use that for a debt consolidation loan, or as collateral.

If you want to get debt free, apply for a debt consolidation loan today. Why wait any longer? You can have all your debts cleared, get one monthly payment, and you might be able to get extra cash when the loan closes.

Debt consolidation loans are becoming more and more popular to get debt free. When you get a loan, your debts are paid immediately, your credit score begins to repair soon after the debts are paid, and you feel better about life itself. Debt consolidation loans come in many forms. If you get extra cash when you do a debt consolidation loan, think of the things that you can do with some extra cash. You can use it to fix your home, build a shed or garage, take a vacation, or go shopping with it. That extra money is for you. Get debt free today with a debt consolidation loan. You will so glad you decided to do this.

How to Get Debt Help

Shaun Connell — Sat, 29 Aug 2009 13:03:33 +0000

Many millions of men and women in America are in Dept. About $1.4 billion in debt rises each and every day. So what does that mean? That means that nearly $30,000 exists for each man, women, and child in America. It goes without saying that this is a staggering statistic. Even still, as if that weren’t enough, even more people try to get out of debt by putting themselves into more debt by pulling out loans, and using credit cards to pay out large bills. Okay, so in the sentence above, we just heard about our main problem. The famous American Credit Card dept issue. Something to note is that not all Americans use credit cards. However, credit comes with interest rates. The interest is generally between 10 and 30 percent of the initial balance. So in the long run, paying off credit debt can be extremely difficult. However, this doesn’t mean that credit debt is impossible to pay off.

Credit debt is as simple as setting up a payment plan. With steps, and only the most excellent layout. Not to say that devising a payment plan is necessarily easy. Even still, it can be done. Now, these steps will require some patients. It will not happen over night. It my not even happen over the next several years. It really depends on the debt and how much the person in debt can payout each month. The first step is simple, as most steps are. List each of your credit cards. You will want to include the high balances, interest rates, and minimum payment on each of your cards. This information can be found easily on your latest months billing statement. Order your cards on the list such that the cards with the highest interest rates are at the top of the list, and the lowest ones are at the bottom of the list. Calculate the sums of the minimum payments. The total monthly minimum should be your absolute lowest monthly payment on the list however, remember we want to pay more than the minimum in order to quickly and efficiently repay the debt. So take a look at your budget. Analyze how much extra income you are able to come up with every month in exes with the minimum you have to pay. Whether it’s just $20 a month or $100 extra, each ounce helps.

While your payments arrive for the months ahead, payout the minimums on every card except the one at the top of the list. Remember, the one at the top has the highest interest and is costing the most money because it is maintaining a balance. So additional money you managed to save in the previous step apply to that card. You should continue this process until the first card is paid off. Eventually that card will be paid off. And when that card is paid off, continue on with the minimum payments on each of the other cards. But now you will drop one step and put it on another. Take the amount you were paying on the first card as well as to the minimum payment and now apply it to the second. Repeat this process until all cards are paid off. Eventually the cards will be paid off at some point, and you will be debt free.

Of coarse there are so many other forms of debt, but there are so few ways that it can be cured. I have given what is a proven method of debt relief and applied it to a popular sort of debt. However, keep in mind that this recipe for debt relief can be applied to other forms of dept as well. Whether steps have to taken off or even added. It is just universal safe way to keep your hands out of debt and your minds out of worry.

Want Out of Credit Card Debt? Rip Up Your Credit Cards

Shaun Connell — Fri, 21 Aug 2009 22:17:32 +0000

Those in credit card debt are in this situation for two reason only. One is an illness has cost them money and they had no medical coverage, either private or public. Not a smart move. The second reason is that they cannot manage money. Therefore, credit cards in and by themselves are not evil. They are evil for those who end up paying the minimum and die in debt. When they die the debt need not be legally paid unless it is tied up in an estate matter.

Moving on to the core question. If you cannot handle money tear up or rip up or cut up your credit cards. On the other hand there are those who handle debt nicely, even though they may not make all that much money. In this case they should go slow with the scissors.

When you rent a car you can put the reservation on a card and pay later with cash, with no balance on your card. When you charge something you are getting an interest free loan for a month. If you pay it back in a timely fashion, you owe no interest and the credit card companies despise you as much as the non-payers.

You must ask how important cash is at the time. If you must have cash on hand, charge and pay at the end of the month. If you need to watch the big game and make a purchase of several hundred dollars, pay it off in a planned pattern. Doing so will cut the interest owed to a negligible amount no matter how high the rate of the card. And all this time you have the product and cash for everyday needs.

Naturally, it would be the optimum situation to have put this television on a low interest or no interest card. I can attest to this because some companies were losing money on me and dropped me even though I used their card often. I was not paying them sufficient interest. I was as bad a deadbeat, as a late payer.

As you have noticed I was never in debt. If you got into debt from buying everything and anything then it is time to get the scissors out or rip up your credit cards. All of them, and start a disciplined regimen until you learn the value of money and how dangerous debt can become. Ask the U.S. government, but then they can print money — probably won’t be seeing Obama asking for a debt consolidation anytime soon.