Credit Card Debt Consolidation

Many New Mexico residents and consumers across the nation are confronted with high-interest credit cards and other unsecured debts. As a result, many consumers are looking for a debt relief option that can not only provide much-needed relief, but possibly save a substantial amount of money each month. As a form of debt relief, the goal behind a debt consolidation program is to combine or "consolidate" all of your high interest unsecured debts into one, more predictable, monthly payment made to a debt consolidation company. The debt consolidation, or credit counseling agency, then has the task of distributing on time payments to each of your creditors until all debts in the program are paid off, or resolved. Before we go into the details of how a debt consolidation debt relief program works, understanding how a credit card debt consolidation debt relief program differs from a debt consolidation loan is crucial.

Comparing Debt Consolidation with a Debt Consolidation Loan

Debt consolidation through credit counseling and a standard debt consolidation loan both have similar goals, but the way each approaches debt relief is actually very different. In the case of a debt consolidation or debt management plan organized by a credit or debt counselor, the objective is to gain an understanding of a consumer's debt load, the amount of money that can reasonably be set aside each month to pay off or pay down debts, then design a personalized plan that "consolidates" multiple high interest consumer debts into a single, more affordable, payment each month. These plans can help consumers resolve debts as quickly as possible, at both a pace and a price they can afford.

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On the other hand, a debt consolidation loan involves consolidating multiple high interest credit cards and other debts to be paid off all at once with the proceeds from a debt consolidation loan. Upon first glance, a debt consolidation loan makes perfect sense in that it can "convert" multiple high interest debts into a single, lower interest rate loan. However, New Mexico residents seeking approval for debt consolidation loans should be aware that they typically require that a home or other asset be used as collateral. That means that if consumers who are already struggling with debts hit a rough patch financially, they could be putting their home or other assets at risk. In essence, they may have taken "unsecured" debt that doesn't put their home at risk and turned it into a "secured" debt that does.

Also, many consumers who use the provisions of a debt consolidation loan to pay off credit cards end up quickly amassing a whole new stack of credit card debts. This leaves consumers with BOTH a debt consolidation loan and multiple high interest credit cards to deal with. Now the situation has gone from bad to worse and the complete circle of debt continues.

Your Personalized Debt Consolidation Program

A debt consolidation program, also known as a debt management program (DMP), is intended to combine or consolidate multiple high-interest consumer debts into a single, more predictable monthly payment. Using the benefits of debt relief, such as lower and more lenient interest rates and the waiving of late fees and penalties, a debt management plan coordinated by a credit counseling service or a debt counselor can provide personalized support for consumers who need a reliable way out of debt on an expedited timetable.

How are plans customized for each debtor? First, they will typically interview consumers in order to get a clear understanding of all of their debts. Then they will conduct a budget analysis with consumers to find out how much money can be realistically allocated each month to pay down those debts. Finally, based on this information they will come up with a strategy (a debt management plan or DMP) and send proposals to each of the consumer's creditors requesting the benefits of debt relief on behalf of the individual or family experiencing financial hardship. These benefits can include lower interest rates, a waiving of late fees and penalties, and generally more favorable repayment terms. Those creditors who agree to the proposals are then added to the debt management plan. For those that do not, consumers are still obligated with creditors according to the terms of their original agreements. Overall, consolidating debts or following debt management plans can be very effective and save quite a bit of money, but consumers must STOP using credit cards and begin the process of paying down the principal amount of debt at a LOWER INTEREST RATE, on time, every month.

A credit card debt consolidation or DMP may help you resolve debts faster while still saving money. Find out by requesting Your Free Debt Relief Evaluation and Savings Estimate.

State Financial Assistance

While New Mexico's state government does not provide debt grants or programs to help consumers resolve their debts, it does maintain a variety of programs for individuals and families who are considered low-income or need a helping hand while going through a financial hardship. Examples of such programs may include the New Mexico Low Income Home Energy Assistance Program (LIHEAP), Medicaid and Head Start, among many others. To learn more about these resources, go to the state's Human Services Department official page Looking for Assistance section.

Benefits of Debt Settlement

Many people have experienced debt relief through credit counseling, but consumers need to be aware of its challenges. For example, debt management requires discipline and a large amount of restraint to avoid using credit cards. Also, it typically takes three to five years to complete the program and take advantage of all the money saving benefits of debt relief, such as lower interest rates and more reasonable repayment terms.

If you are looking for an alternative to debt management, you may want to consider debt settlement. Debt settlement is looked at as a more intense or aggressive form of debt relief that could help consumers, facing the prospects of bankruptcy, get out of credit card debt faster. Furthermore, consumers seeking debt relief using this method need to save money in a separate, designated account that can later be used as the funding source to reach a settlement with individual creditors.

With debt settlement, it's common that if consumers fall seriously behind in payments, credit card companies may decide eventually to "sell off" debt as "bad debt" to a collection agency. This is not an ideal situation for creditors, as they may get as little as 10 cents on the dollar. Under those circumstances, it is not surprising that credit card companies may be willing to accept a reasonable settlement offer made by you or by a debt settlement company negotiating on your behalf. It is important to know that resources saved through credit card settlements are subject to federal taxation. In addition, when consumers default on their credit card agreements in order to place money in a settlement fund, creditors may threaten or take legal action. Finally, debt settlement will typically lower your personal credit score, but personal bankruptcy will have a more serious, longer lasting effect.

To explore your debt relief options, request Your Free Debt Relief Evaluation and Savings Estimate