Debt Settlement Page 3

Other debt relief programs:

1.No program - Pay the Minimum Balances / do nothing

$20,000 @ 18% will take 487 months (40 yrs) to payoff, with an additional $38.809 paid in interest over that time period.
Credit stays the same or is damaged from charge offs.
Paying your normal minimal payments will take 40 years to pay off your credit card!

2. Debt Consolidation -

Equity: Using your home equity to pay of the credit card debt and make it a secure debt within your mortgage. Equity - who has it? On top of that, DTI's are too high to qualify. In this time of lower home values, it is not a reasonable solution.
Securing with personal guaranteed loan - once again - very high interest rates, and expensive fees.
You get a lower interest rate, but at a longer term - meaning in the long run you pay more for the debt then before!
If the company goes out of business or sells your loan, you may be faced with even higher interest rates then before.

3. Credit Card Counselling Program -

These companies are generally owned by the creditors. 3rd party involvement on your credit report.
Client is paying interest. $20,000 at 9% will take 60 months (5 years) to payoff, paying an extra $7,910 in interest.
Only credit cards are being taken care of from the credit counselling program.
Credit is negatively affected for 7 to 11 years - almost as bad as a Bankruptcy.
Many market themselves as non-profit but in reality do not perform or act as one.
Many of these have a tendency to pay your bill late, or sometimes not at all, thus incurring additional fees.
Some try to trick you into sign over all financial interests and responsibilities to them on your house and/or investments.
To get funding for following year, they have to be in good terms with the credit card industry - not you!
Too often they demand payments higher then you can afford long term and you fail the program.
They do not try to get your debt reduced and expect you to pay back 100 percent of the debt.
Most mortgage lenders will view you being in a Credit Card Counselling Program as bad or worse then a Bankruptcy.

4. Bankruptcy -Chapter 13

Public Knowledge - embarrassing and expensive option (retainer fee alone for BK Attorney in the thousands).
Credit will be affected for 7 to 11 yrs.
Hard to qualify.
You still have to pay off the debt in payments, but with no interest rate.
The amount you have to pay is determined by the court, and you have little to no control over how much you have to pay.
You’re starting over - credit is severally negatively affected.

5. Bankruptcy -Chapter 7

Public Knowledge - embarrassing and expensive option (retainer fee alone for BK Attorney in the thousands).
Credit will be affected for 7 to 11 yrs.
You do not have to pay off the debt put into the bankruptcy.
Harder to qualify then the other programs, but is considered the last good option.
You’re starting over - credit is severally negatively affected.