Strategy 97 of 107 · new for the five-year plan
A nonprofit credit counselor's plan to cut card rates
What it is
A certified nonprofit credit counselor can set up a debt management plan that often lowers card interest rates.
Steps
- A certified nonprofit credit counselor can set up a debt management plan that often lowers card interest rates.
- Pay the same amount you pay now; more of it goes to balances.
- When the cards are paid, roll that payment to principal.
Repeat: Monthly, until the cards are paid.
Measure: Payment freed at the end.
Try it in the calculator Enter its amount in "Monthly non-income amount to principal". Add a payoff goal of 5 years to see what is still needed.
Risks
- Cards in the plan are usually closed.
- Avoid debt settlement companies that charge up front.
Who it fits
Average household, Single, No high school diploma, No college degree, College students, Grandmas and grandpas (62 and over), Married couples, Newlyweds
Needs
Has car, card or other loan payments
How predictable
Depends on people or program rules (tenants, family, IRS records, lenders)
A worked example (hypothetical, not guaranteed)
Picture a hypothetical household (average household). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.
They follow the steps: a certified nonprofit credit counselor can set up a debt management plan that often lowers card interest rates.
Suppose it brings $600 a month on principal from this strategy, not from the paycheck. The loan would be paid off in 16 years 3 months instead of 30 years, saving about $196,219 in interest. To finish in five years, they would still need about $3,374 a month more from other strategies. That is why the five-year sequences stack several at once.
The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.
Sources and more information
- FTC: Choosing a credit counselor consumer.ftc.gov
- FTC: How to get out of debt consumer.ftc.gov
Where to get help
- CFPB: Find a HUD-approved housing counselor (free or low cost) consumerfinance.gov
- USA.gov: State consumer protection offices usa.gov
- CFPB: Submit a complaint about a lender or servicer consumerfinance.gov
Related strategies
- 96. Apply for hospital financial assistance on medical bills
- 98. Lower health premiums with a marketplace premium tax credit
- 99. Children's coverage through CHIP or Medicaid
- 100. Free early childhood programs instead of paid daycare
- 101. Get out of required flood insurance with a FEMA map amendment
- 102. Wind-mitigation and FORTIFIED roof discounts