Are credit card companies or debt collectors on your case? Are you receiving harassing phone calls? Do you worry that your wages might be garnished? If so, don’t feel as if you’re all alone. Thousands of Americans are in the same fix. In many cases it’s through no fault of theirs.
Maybe they lost their jobs during the Great Recession or suffered a serious illness or accident that sent them into a black hole of debt. Or maybe they misjudged how much debt they could handle. But none of this really matters. These are all people like you who are having a serious problem with debt and wondering what they can do to find some relief.
If you’re having problems with a debt collector
Is a debt collector calling and threatening you? If so, you’re not alone in this either. I read recently that even our federal government is hiring companies to collect on past-due student loan debts. Most debt collectors are reasonable people but as you may have learned some can be real jerks.
You have rights
You do have certain rights. These are spelled out in a bill passed by Congress a few years ago called the Fair Debt Collection Practices Act. Among other provisions, it limits calls from debt collectors to the hours of 8 AM to 9 PM. It also states that collectors are not to call you multiple times during a day. If you are being hassled, you can send the collection agency what’s called a “cease and desist letter” informing it that it’s not to contact you again. At that point, the collection agency is supposed to contact you only one more time – to tell you it won’t be contacting you again.
The problem with this law
There is one significant problem with this law, which is that some debt collectors simply ignore it. And the only recourse you have to this is to report the agency to your state’s attorney general or hire a lawyer and file suit. Unfortunately, in many cases neither of these work.
Thus, a consolidation loan
This is why consolidation loans – or debt consolidation loans – are growing in popularity as a way to get out from under credit card debt and to get rid of those malicious debt collectors.
What makes a consolidation loan particularly attractive is that it’s a simple and quick way to eliminate credit card debts. However, there are some caveats attached to these loans. For example, if you owe $10,000, $15,000 or more you will most likely have to get a secured loan – or one where you need to have collateral. Unless you own a vacation home or a motorhome that you could pledge as collateral, you will probably have to use your home – in the form of a second mortgage or homeowner’s equity line of credit (HELOC). Whether you choose to get a second mortgage or a HELOC, you’ll be putting your home at risk because if you were to default on the loan, your lender could repossess it.
The pros of a consolidation loan
In addition to being a quick way to get rid of credit card debts, a consolidation loan has some other advantages. For one thing it eliminates the need to make multiple payments every month as you will need to make only one payment a month to the bank or credit union where you got the loan. Second, it should have a much lower interest rate. This may surprise you, but you should be able to get a consolidation loan at an interest rate of 5% vs. the 18%, 20% or more you may be paying on your credit cards. Maybe most important of all, your monthly payment on the loan will be much less than the sum of the monthly payments you’re currently making.
A consolidation loan isn’t the optimal way to get rid of credit card debt because it does nothing to reduce it. However, it can be a good way to get credit card debts under control and say bye-bye to those evil debt collectors.