Options for consolidating credit card debt expand exponentially each year. New services appear constantly and promise faster results, greater savings and quicker retirement of principal balances. Nevertheless, the best way to consolidate credit card debt and enjoy huge savings remains highly personal.
Each person experiences unique financial challenges. The ability to repay debts with ease is based on income, living expenses and total debt payments. A person who earns a large income may have little ability to save when owing a correspondingly high level of debt. Similarly, a person who earns a below average income may save a portion of a weekly salary check easily when living a modest lifestyle and owing little or no debt. To a large extent, in both circumstances, personal choices and lifestyle determine the amount of wealth accumulated long term.
Anyone struggling to pay debts has a wide range of options available to reduce monthly payments. These options range from small private changes in spending habits to filing bankruptcy. In the middle ground, many people discover that debt consolidation programs produce rapid results without the stigma and sever consequences of filing bankruptcy.
The best way to combine credit card debts into a single monthly payment depends on the amount of debts owed. When debts total less than $10,000, a debt management plan may be the best choice. When the total of credit card debts owed is greater than $10,000, settlement plans may be the best choice. This difference is based on the way that services charge fees for administering programs.
Both management plans and settlement plans tend to charge a relatively small monthly administration fee. In most cases, these fees range from $30 to $50 per month. In addition, settlement plans also charge an initial setup fee equal to the first scheduled plan payment.
A management plan typically reduces monthly payments by 20% whereas a settlement plan typically reduces monthly payments by 40% to 60%. If a settlement plan requires a $900 per month payment, the initial fee for participating in the plan would also be $900. The greater savings available under settlement plans is achieved by negotiating substantial reductions in the amount of principal owed. In most cases, the initial settlement plan fee is collected by negotiating a one-month grace period before regular plan payments begin.
To discover the best way to consolidate credit card debt and enjoy huge savings, request several quotes from top-rated services. Review estimated costs and results from both types of plans using a side-by-side comparison. Look carefully at the total amount paid to retire all principal balances. After comparing available options and actual savings, the best choice will become clear.
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