I've heard of it, but the problem is that they aren't a DMP (debt management program), but instead are a debt settlement company. Avoid debt settlement companies at all cost. When you sign on with a company like this, you are closing all of your CCs and exchange you pay them a fee and they'll keep a large portion of it for their own expenses. With whatever is left over, they will negotiate a partial payment on your CCs. In terms of credit, it will trash it. Settled accounts are scored on par as charge-offs. Or if they accepted lower payments, you'd be marked late monthly because you are paying less than the originial terms of the CC agreement. And not every CC of yours will want to be on board with this firm anyway. They can reject the settlement company's offer and sue for the full balance if they wanted. It creates a mess all around. Also, check out FTC's website and you'll find that debt settlement companies rank up there with regards to complaints. I'd avoid this company and ones like this at all cost.
18% isn't unreasonable. Even when my scores were in the 700s (almost there again), my APR range on new CCs would be 12%-18%, give or take. In fact, most of my CCs are above 18% now. A loan would likely be much less, but I wouldn't expect one unless you had scores in the high-600s+. Even if you did get an offer for 0%, that 0% isn't forever. Most are 6-12 months. You'd have to pay it off within that time to take advantage of the no interest.
If the goal is to get out and under of this one CC, then I'd hunker down, rebudget, and pay it off. I'd write everything down on paper, including all income sources and all of your expenses. Then I'd study it and make some tough, but rewarding choices. In other words, I would do anything and everything to cut your expenses and anything to increase income. The surplus would then go to the CC to chip that away. Above all, cut up the card! Never use it again while paying down debt.
For your expenses, I would ask myself, "Is having a $0 balance on this CC more important than _______?" and I'd fill in the blank with the item(s) in question. If the answer is yes, then I'd make the change. You can always change back in the future. There's no permanency to this at all.
- Cancel cell or landline, but don't carry both if you don't have to
- Cancel cable
- Change your health insurance plan to a high-deductible plan to save $$$$
- Change your car insurance to lower the limits and/or to increase the deductible
- Change your renters or homeowners to a cheaper plan/lower limits
- Stop eating out
- Cancel any travel or vacation plans temporarily
- If you keep your cell, change the plan and lower your minutes to save
- Contact your utilities to inquire about a budget plan. Sometimes the plan's payments are lower than your current payments
- Analyze your food budget. Reconsider where you shop at
- Temporarily stop any hobbies that cost $$$
- If you order online, re-evaluate those shipping costs. Many places will offer free shipping.
- Stop going to coffee joints, if you go there already. $4-5 lattes do really add up.
- Buy in bult and cook in bulk. Freeze what you don't consume and you'll save.
- Go over every CC and bank statement and figure out what you wasted $$$ on. I do this each year and its sobering.
- Buy clothes on clearance.
- Pay bills online and save $.44 each.
- Don't impulse buy. If you want something ask yourself if you need it. If you think you need it, sleep on it for a day or two before buying it.
- Temporarily stop any saving or investing or 401(k) or IRA. The 18% on that CC trumps the earning you'd receive off that investment.
- If you got a tax refund last spring, you overpaid your taxes to Uncle Sam. That was an interest-free loan to them. Stop that. Put the interest in your pocket instead. If you got a refund, adjust the W-4 to increase your dependents or go with a flat deduction of $x. To calculate that, look on the 1040 and figure out your tax for the year. If your financial situation is roughly the same (e.g. income, dependents, deductions, etc.), then take that tax and divide it by the number of pay period you'll have in a year. So, if you get paid biweekly, divide that tax by 26. This would equal how much you'd want to put as a flat deduction for each paycheck. If you got a refund last year, your next paycheck would be higher and you can use that to pay off debt. Do the same for state if applicable.
For income, increase that. If you have a job, get a second. If you have a second, get a third. Even a 2nd, part-time 20-hr/wk min.wage job will net you $600/mo. Imagine how fast that debt would melt at $600/mo. In addition, at simple interest, that would save almost $10/mo in interest. Consider other revenue streams. Consider starting a business or two on the side.
Outside of income and expenses, consider reallocating the assets you have now. If you have an extra car, consider selling it. The savings on the taxes (if applicable), gas, insurance, and upkeep would save you hundreds, if not thousands, each year. Sell any recreational vehicles or trailers, if applicable. Cash in any savings for the debt. Cash out any non-401(k) or IRA investments to pay off debt. Again, 18% would be higher than your current earning off of that investment. Sell anything around the house that you don't want or need. Make Craigslist or Ebay your friend.
Sometimes paydown of debt works better than reconsolidation. I bet with some aggressive adjustments, you'll be debt free inside of two years based on this CC.
