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Financing Resources
This page is dedicated to providing homeowners facing foreclosures with alternative financing options.
Credit Counseling Services
These "nonprofit" agencies are ready to help you consolidate your credit card payments into one payment including their "administrative" fee. They work with your creditors to get your interest rates reduced but do not consolidate your credit cards. You send your monthly payments to them and they in turm pay your creditors.
PROS
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This saves your credit score by keeping your creditors current
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It's one, convenient payment every month
CONS
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Administrative fees of $30 - $50 are expensive
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You could work out lower interest rates with your creditors
Debt Reduction Services
These "forprofit" companies also want to help you but in a much different way. They have a formula for figuring an affordbale monhtly payment plan that will pay off your creditors within 3 to 4 years. Their philosophy is to negotiate with your creditors on a reduced payment equal to 50% or less of the original balance. They claim that they negotiate balances of several hundred of their clients at a time to be able to settle for half of the original balance. Their formula for figuring your monthly payment is as follows: take the total balance and multiply by 16%(1), add that to 1/2 of the total balance(2), and divide by 42(3).
For exmaple:
Total balance: $20,000
(1) - $20,000 * 0.16 = $3,200 - service fee
(2) - $3,200 + $10,000 = $13,200 - new total balance
(3) - $13,200 / 42 = $315 - monthly payment for 42 months
PROS
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Reduce the amount that you owe by 50%
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It's one, convenient payment every month
CONS
- They are a "glorified" bank, holding your money for a minimum of 2 years
- This will ruin your credit because these creditors will come up as unpaid for years on your credit report - it's almost like bankruptcy
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