I recently remodeled a house. I got the house for such a good deal that I had no problem using credit cards to pay for the repairs. Unfortunately, the market tanked as I was putting the house on the market. What I am left with is a $2000/mo mortgage and around $45,000 in unsecured debt. I make around $80k a year at my primary job.
Can I negotiate with the credit card companies? What is the best strategy?
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I can see the problem. Expenses that you paid for, with what you hoped would be short term credit, are now unlikely to be paid off since the home isn’t selling in this bad real estate climate.
Your minimum monthly payment on the $45,000 of credit card debt is probably $900 to $1,000 a month with very little of that actually reducing the total balance you owe.
As long as you are current on your bills, you will find very few real offers from your creditors to provide you with better terms simply by calling and asking without preparation and facts.
But here is one approach to try. What I would suggest is using any junk mail offers that come through your door in the next couple of weeks as free market research. Pay attention to the rates being offered to you on those new credit card offers and then call your current credit card company and ask if they can match or beat that rate. If they say that they can’t, ask to speak to a supervisor and ask nicely again.
But with some major creditors already raising interest rates, I’m less hopeful as I write this that the interest rate reduction trick will work.
A long shot that might work is to look through the latest low rate balance transfer offers and move your debt to a lower rate card. Despite tough economic times right now, good deals on balance transfers are still available, click here for current offers.
If you can’t get any satisfaction from your creditors, you could contact a debt management program and see what the current interest rate reductions are through that approach. Typically a debt management program is best used by someone that is struggling to pay the bills, wants lower interest rates, and wants to avoid bankruptcy. Entering a credit counseling program can hurt your credit but if you want reductions in payments and interest rates, then no pain, no gain.
Jay Got Sucked Down With The Falling Real Estate Market by Steve Rhode