What if you Can’t Get the Credit To Consolidate Your Debts?
It happens to many of us. We’ve been struggling hard to manage by ourselves, and by the time we call for help, it’s too late. In this section we talk about Survival Rules when you’re over you head in debt. We take a close look at Credit Card Balance Transfers, an option for those who have some credit left but are not able to qualify for a bank Debt Consolidation Loan. Plus we talk about Credit Counselling and Bankruptcy – two options for when your credit problems seem too hard to handle.
Credit Card Balance Transfers
Every now and then you get in the mail a flyer from a credit card company offering an attractively low interest rate if you’ll just transfer over to them the balance from your other credit cards. Read the fine print, though, and you’ll find out this deal isn’t as attractive as it seems.
Occasionally, though, the deal is a genuine bargain that can help you ease your load. How do you know whether you’re getting a deal or whether you’re headed for trouble? Here are some things to look for:
- Interest rate. Many credit cards try to draw you in with low interest rates for a specified number of months. After that the rates go up – often to an amount higher than normal for the card – or higher than the interest you’re currently paying on the amount you owe. Look for offers that promise a fixed rate lower than what you’re paying now and that continues until the transfer is paid off.
- Transaction fee. Some cards charge you a transaction fee for the privilege of doing a balance transfer. This fee can raise the price of your loan. Make sure you know what the fee is and how it will affect your indebtedness.
- Penalties. Read the fine print carefully. What are the penalties if you make a late payment? Or charge something on your account after you’ve made the balance transfer? Are there any other conditions, such as minimum payments? Often if you make a late payment, the interest rate goes up to the standard rate for cash advances. Also, the credit card company may apply your monthly payment first to paying off any purchases on the card. And then after the purchases are paid off, towards the loan. In other words, if you continue to use the card, you may never pay off your debt.
- Minimum payments. Make sure, also, that the minimum payment on the loan is something you can handle. It should be less than the total of the other loans you are paying off.
- Conditions. Not everyone qualifies for the special low-interest deal that is advertised. Be sure you read the fine print to make sure you do, or you could end up paying more for the balance transfer than you did for the original loan.
Survival Rules When You Can’t Pay All Your Bills
When creditors are phoning you and the money doesn’t seem to stretch far enough, it’s easy to loose your head. Here are a few simple rules to keep things from getting worse.
Survival Rule #1: Don’t wait until things get totally out of hand. Take action as soon as you see a problem developing.
Survival Rule #2: Cut up those credit cards. Don’t borrow on them to pay bills you can’t pay. It will only escalate the problem.
Survival Rule #3: Don’t bounce checks. In some states, bouncing a check is a worse crime than not repaying a debt. If you can’t pay, be honest with your creditor.
Survival Rule #4: Consider debt consolidation.
Survival Rule #5: Call your creditor(s) and try to work something out. Your creditors know that if you have to declare bankruptcy, they may not see a single penny of the amount you owe them. They have a vested interest in making an arrangement with you that protects their money.
Survival Rule #6: Go to a credit counselor.
There are credit counselors in every city in the U.S. You can find them in the Yellow Pages under “Credit and Debt Consulting Services.” Some are privately run; others are non-profit organizations. All are dedicated to helping people with financial difficulties manage their debts and repay the money they owe.
They work with you and your creditors to arrange a payment schedule that allows you to repay your debts on the income you have. In return, your creditors agree to take no further action, provided you keep to your commitment.
Credit counseling is an excellent way to avoid the stigma of bankruptcy. Creditors like it because they get their money. Debtors like it because it protects their credit rating, while taking some of the pressure off them.
The Consumer Credit Counseling Service is probably the most widespread and best known of these organizations. It is non-profit. Their services are free, although, if you work out a repayment schedule through them, they may charge a small fee to administer it. For an office near you call 1-800-338-CCCS.
Bankruptcy As A Last Resort
If all other avenues of relief fail, you may find you find yourself forced into bankruptcy.
This is a last resort. If you declare bankruptcy, it goes on your credit history. It will be almost impossible to obtain credit for 7-10 years, depending on the type of bankruptcy you declare.
Chapter 7 allows you to totally wipe off the majority of your debts. You also lose all your assets, except for a small portion protected by law. Some debts cannot be eliminated by Chapter 7. These include child support, alimony, student loans guaranteed by the government and income taxes for the previous 3 years. This type of bankruptcy remains on your credit record for 10 years.
Chapter 11 allows you to restructure your debts by establishing a schedule to pay them off over time. You get to keep your assets and your creditors agree not to take any further action, as long as you keep to the payment schedule. This type of bankruptcy remains on your credit record for 7 years.