5 Tracks of Wealth

Credit card debt elimination has become a major topic in recently because of the drastic changes in the economy and people’s spending habits. People are being forced to make alterations to their lives to survive and there has been a desperate need for people to really understand credit card debt elimination and what options are available. The possibilities are endless, but there are 3 strategies that are accessable to nearly everyone in one form or another:

1) Pay Off Highest Interest Accounts First. This credit card debt elimination strategy is very simple. First you identify your highest interest account and pay the maximum amount possible toward the principle as often as possible (while still paying the minimum on your other accounts). Once the highest interest account is paid off, then proceed to the next highest interest account and paying it of next, etc. until all accounts are paid in full. This strategy gains momentum as accounts are paid off and more ‘extra money’ is available to apply toward the next account.

This method’s largest positive is keeping the highest FICO score possible throughout the payoff process and it is 100% in integrity with your original agreement with your creditors. The negative is that it may take many years to complete and also gives no cash flow relief. Additionally, if you aren’t in a position where you have any ‘extra’ to apply toward the principle balances of your accounts, this method will typically take 10+ years to execute.

2) Consolidation (and refinance) Lines of Credit. This includes any type of loan where a lender will set up a loan to pay of your existing accounts while putting them all into one large loan. This type of plan works if you have strong enough credit (or equity in your home) that will allow you to qualify for the guidelines of the program.

The advantage is that your FICO rating will remain as high as possible, and rolling all of your outstanding accounts into one is much easier to manage. However, consolidation loans generally don’t significantly lower your monthly minumums (so they help cash flow very little), and many times you’ll end up paying even more than you would have on your original plan.

3) Credit Card Debt Elimination Settlement Plan. This style of plan is where you would stop paying on your accounts completely and instead begin taking the money that would be applied toward paying your creditor accounts and putting it in a savings or escrow account for use in negotiations. Once the accounts have been sold to collection companies ( usually after about 4-6 months) you would contact these collection agents and negotiate a lower payoff amount in turn for a lump sum payment. This is a settlement and can often be a considerable discount.

The major perks to this type of credit card debt elimination process are that (if negotiated properly) you will likely only end up paying back a portion of your balances and thus be able to pay them off in a much shorter period of time.

This process can help you be completely solvent within a fraction of the time of other alternatives but has it’s downside too.

The biggest downside is that your FICO score will be lowered by not paying your accounts. Also, creditors may begin calling you to try and collect payments (although there is a way to stop these calls) which may be inconvenient.

Of these 3 types of credit card debt elimination processes, you need to decide what is more important to achieving your goals. If your FICO score is your #1 priority then the 1^st 2 options are probably best.

However if you are unable to pay your current bills, you want to pay off your accounts in the minimum time, or your FICO rating is already beat up, then a settlement program probably makes more sense. In the end, deciding what is important to you, making a plan, and taking action is the best way to permanent credit card debt elimination and financial solvency.

To find out more about credit card debt settlement or for a free debt and credit consultation visit: http://RedCarpetResources.com

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