Reduce credit card interest rates.
I have an insurance agency that gives me a gross income of over $100,000 a year but some bad investments together with a decline in revenue forced me to borrow heavily and I now have a total debt of over $68,000. My accounts are all current with no delinquencies but due to the borrowing my credit rating went from 714, 733 and 705 to 685, 692 and 679. This triggered increases in the credit card interest rates which increased the monthly payments to over $1200 and is putting me into a negative cash flow that forces me to borrow more money - a vicious cycle.
I do not need to reduce the principal - only reduce the credit card interest rates. Can that be done?
Reducing your credit card interest rates or monthly payments is often accomplished one of three ways.
1. You take out a consolidation loan and use all of that money to pay off the credit cards.
Your current debt to income ratio may prevent you from qualifying for a debt consolidation loan in the size that you would need to fully pay off all of your credit card bills. In fact, I do not see unsecured consolidation loans as high as you would need much anymore. You may only be able to secure about half of what you would need.
That could mean using a HELOC or a cash out refinance as a means to accomplish the same goal. That means taking unsecured credit card debt and making it secured. The goes for any business or personal asset you might use to secure the loan.
This is not a method for getting your credit card interest rates lowered directly, but is often the epitome of same.
2. You use a debt consolidation company for their established relationships with your banks in order to combine all of your balances into one smaller monthly payment, and pay that same fixed monthly amount of money until all of your credit card balances are eliminated.
I cover the benefits and drawbacks of debt consolidation counselors more fully in a series dedicated to the topic.
You can call my hotline 800-939-8357 and choose option 1 to speak with a counselor and get an accurate quote for what your lower interest rates would be, and how much your monthly payments will be reduced.
Depending on your answers to my below questions, my suggestion is going to be to call a counselor and see if they can get your interest rates low enough to get you the breathing room you need.
3. You use some of the strategies I outline about calling credit card banks and lowering your interest rates, and try to get them all to agree, or just a couple of the larger balance and/or higher interest cards.
Much of that article series relates to recession era bank policies. I am now seeing several credit card banks return to only offering temporary interest rate reduction plans to their account holders. But they will still give the debt consolidation companies the lower interest rates for the life of your balances. Life of the balance reduction on credit card interest rates is what most people I interact with need.
Getting lower interest rates is harder the more cards you have.
These days, if you have more than 3 credit cards to try to get to play ball with you (lower your interest rates enough to make a difference), or have cards with banks that will only offer temporary reduction, or none at all, I would not try to do this on your own.
Having said that, there are a host of reasons why you may want to look closer at a do-it-yourself debt consolidation strategy. Post your answers to the following questions in the comment box below, and I can offer more specific feedback.
Who do you owe?
What are the balances (use rounded figures)?
What are the interest rates on each account?
Are any of the accounts strictly business credit cards (not in your personal name, or personally guaranteed by you at all) and if so, which ones?
What credit and finance goals do you have in the next 2 to 3 years that will bring your credit scores into focus?
Anyone with question about how to reduce your credit card interest rates is welcome to post in the comments below for feedback.