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Many people have asked us about applying the Mortgage Manager program to eliminating their credit card debt. To answer their question, we sat down here at AmFinAd to see how this can be done, and wound up with some good news and bad news. First the bad news. Our program works with fixed principals that remain unchanged over the life of the loan. Credit cards operate with changing principals because a person can start off with, for example, a $5,000.00 balance but go out in a month or two and charge a $4,000.00 plasma T.V. and completely change the principal. So, the answer is "No," you can't directly apply your credit card debt to our program. However..... The good news is that, with some changes, you could put your credit card debt on our program and start eliminating one of the worst loan debts invented by the banks. However, there are some inherent risks involved that I will cover in a moment. We've trumpeted the idea of "no more loans," but the only way to attack credit card debt with our program is to consolidate all of your credit card debt under one fixed loan - with a fixed principal. But ask yourself first if you really need to do this? If your credit card balance is less than $5,000.00 spread over 2 or 3 credit card accounts, perhaps you can use this approach. Take the smallest balance and pay as much as you can afford each month until it's paid off. Pay at least the minimum for the other card(s) - or a little more if you can afford it. Then take the amount you were paying on the first card (which is now paid off), and apply it to the second card + the amount you were previously paying until that one is paid off. Continue until all of the cards have a zero balance. For example, you're paying $300 per month for card #1, and the minimum of say $150 per month for card #2. When card #1 is paid off, you now pay $450 per month ($300 + $150) for card #2 until that one is paid off. If there's a card #3, you'll now pay $450 per month + the minimum amount you were paying for card #3 until that one is paid off. Needless to say, while doing this you are not charging anymore stuff onto your cards, ARE YOU?? Now, if your credit card balance exceeds $10,000 and up, shop around for a consolidation loan (Sorry! It's the only way we can set this up, but well worth it!) which will pay off all of your credit card balances and give you one fixed loan, with one unchanging principal, and one monthly payment. You can now put this loan on the Mortgage Manager program and save a bundle of money. Run the numbers on the software before commiting yourself to this loan to see if you like the savings and time frame. BUT BEWARE, AND HERE'S THE PROBLEM! You will now have zero balance on all of your cards - and that's very tempting, so this is what you MUST do: (1) DON'T carry your credit cards in your wallet. (2) DESTROY all of your cards by cutting them up with scissors. (3) If you must keep ONE, keep the one with the smallest limit, and (4) Put that ONE in an envelope and give it to your attorney or someone you trust so you're not tempted to use it. OR (5) Put it in your safe deposit box where you can't easily get to it. (6) Use the ONE card only for an emergency, and for an amount you can easily pay off in one or two months. An emergency is for something that you absolutely need to sustain your life: a car repair (if you need it for your work), boiler repair in the dead of winter, medication, etc., NOT a new cell phone with a 10 megapixtel camera and an MP3 player that makes your coffee for you. I'M NOT KIDDING! Too many people transfer balances to a "low interest" card or loan and wind up with more debt in just 6 months. And be prepared to receive letters and phone calls from your credit card companies trying to seduce you into using your card again with all of their tricks. Tell them what I tell them when they call me: "Are you offering me free money that I don't have to pay back?" They reply, "Well, er, no but.." Then I tell them, "Then stop wasting my time because I'm strictly on a cash only basis," and hang up. They don't care about you, they only care about keeping you in financial slavery - to them! Paying off credit cards is the hardest task because the banks add on monthly interest charges, hefty late charges and overlimit fees. Our suggestion is the best way we know of to beat the banks at their own game. Shop around - go to at least 3 banks and compare interest rates for the consolidation loan you're seeking. The interest rate depends on your credit rating and the rate can vary between 11.5% up to about 24.5%. When YOUR interest rate is determined by the bank, ask yourself if it's lower than your credit card rate. You don't want to get a 25% rate where your credit card average rate is 17%. Remember, these are hard times for banks, and they give the lowest rate to persons with excellent credit history. If you were late with your payments - especially over 30 days - you'll be penalized on your consolidation loan. You may also want to do a Google search on the net under "consolidation loans" or "credit card debt consolidation." Get your lowest and best rate you're comfortable with. Then, go home and run the numbers in the software and make your decision. I cannot stress this enough: YOU CANNOT GET RID OF CREDIT CARD DEBT WHILE STILL CHARGING STUFF ONTO YOUR CARD(S). IF YOU MUST KEEP ONE CARD, DON'T CHARGE ANYTHING UNLESS IT'S AN ABSOLUTE EMERGENCY - AND THEN NO MORE THAN YOU CAN PAY OFF IN 1 OR 2 MONTHS. I wish you all the best in eliminating your credit card debt. Let us know how things work out for you. Take care, William Homolka, CFO AmFinAd , New York |
