Consolidating debt a
While you’re in the program, you won’t be able to use your credit cards or open new ones.The plan is designed to get you out of debt in three to five years, after which all of your accounts should be reported as paid-as-agreed.One of the biggest pitfalls of debt consolidation is the risk of running up new debt before the consolidated debt is paid off.When you finish paying off credit cards with a consolidation loan, don’t be tempted to use the credit cards with their newly free credit limits. You may have heard that doing so could hurt your credit score, and it might.
You can figure out how long it will take to pay off your debt using a debt payoff calculator like this one from CNN Money.If you’re already struggling to make your debt payments or your credit cards are maxed out, you may not qualify for a zero percent credit card balance transfer offer.Bad credit debt consolidation loans are available from some lenders but they are costly.In reality, credit card debt forgiveness is rare and tricky, and can be very costly. Then you have to convince your creditors that you don’t have the means to repay your debt and your situation isn’t likely to change.If you manage to work out a debt settlement agreement, the creditor is all but guaranteed to report your forgiven debt to the IRS. The amount of tax you owe on the forgiven debt depends on your adjusted gross income and your tax rate.