Credit Crisis Offers Opportunity for Those in Debt

We're living in a unique point in our history when it comes to credit and debt. Whether it's businesses, individuals or even the government everyone seems to have borrowed more than they can pay off. The good news for you is that because creditors fear so many borrowers will default there are opportunities to consolidate and negotiate out from under your debt that didn't exist before.

  • Consolidate Debt
  • Negotiate with Creditors
  • Reduce Balances

Consolidating Debt

1. Student Loans

If you have several student loans you may be eligible to consolidate them into one using a Direct Consolidation Loan through the U.S. Department of Education. A Direct Consolidation Loan will reduce the overall interest rate on the money you've borrowed as well as lower your monthly payments to a more manageable amount. You may also have the opportunity to defer payments on your new Direct Consolidation Loan even if you've already exhausted the deferments on your existing loans as well as extend the number of years you have to repay it. There are different terms available contingent on your income and you can often adjust the terms over time as your income situation changes. What's best about consolidating your loans through the Department of Education is that it's free!

2. Consolidating Credit Card Debt

Just like student loans you can reduce balances, monthly payments and interest rates by consolidating your credit cards. Find a new credit card or call one you currently have and find out if they offer a special interest rate on balance transfers. By transferring debt you have on several cards to one lower interest card you will save money each month that you can apply toward paying down the principal on your overall credit card debt.

3. Home Equity Loans and Lines of Credit

If you own a home you may be able to use it to consolidate debt by taking out a home equity loan or line of credit to pay down higher interest debt. Be sure to shop and around and weigh your options carefully before putting your home at risk.

Negotiating with Credit Card Companies

The laws are changing and credit card companies don't have the freedom to change the terms of your account as easily as they once could. Fearful that more and more cardholders will default completely on their cards, they may be willing to make a deal. You may be able to negotiate down 50% or more if you're able to pay off the remaining balance in one lump sum.

Negotiating does not come naturally to everyone. It takes some preparation and some chutzpah. Here are a few tips for negotiating with credit card companies:

  1. Be nice and avoid being confrontational. The person you're talking to is just someone with a job to do and will be more receptive if you're cordial.
  2. Force them make the first offer and turn it down. They have a bottom line and it's your job to find it. Remember if you default or go bankrupt they get next to nothing so they should be willing to settle for an amount just above that.
  3. Take your time. Most negotiations take place over weeks or even months not over one phone call.
  4. Take notes during your conversations and when you reach an agreement get everything in writing.
  5. If you can't negotiate your debt down on your own consider shopping around for a debt settlement firm to do it for you.

Remember the Chinese symbol for crisis is the same as the one for opportunity. If you're someone holding debt the opportunity may be now.

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