How to Change Revolving Credit Card Debt Into a Simple Interest Loan

Most of us who have revolving credit card debt know how punishing the interest rates have become lately. Even if you almost always pay off your credit card on time, it doesn't take much to send the interest rate through the roof. Taking cash advances is another way to end up with a nightmare credit card statement. Hindsight is 20/20, but we are where we are. Many of us may be trying to find ways to transfer this revolving debt into a simple interest loan. Some people do not know the difference between the two, so they don't explore alternatives. I am no financial expert, and the purpose here is only to present some options, not to explain the finances of revolving interest debt as compared to simple interest. I would strongly encourage those of you who do not know the difference, to look it up on Wikipedia or other site that carries an explanation, so you can understand what you may be up against when attempting to climb up out of your credit card debt. You will understand more about why your credit card statement never seems to go down.

Was your home equity line of credit cut off? Maybe you are relying more on credit cards because of it.

Small, individual lenders would like to talk to you. Many of us have property or other assets that which could be used in a collateral loan (collateral is insurance to the lender of repayment should something happen to the borrower). It's worth a few phone calls to see
what might be a great opportunity for you.

Things You'll Need

• A newspaper
• A telephone
• Pad and Pencil
• Your credit card or other debt summaries
• Property balance information (for collateral loans)

Instructions

1. Look in your local classifieds under "Lenders, lending, loans", etc. Some may be local. That would be the best case scenario, so you can visit them in person. Regardless, call them and see what their criteria are for personal loans in the range for which you are looking.

2. Be prepared to answer some questions about property, income and your general setup. Lenders will do a background check on you anyway to get your total financial picture, so be honest. Try to stay flexible in the terms that they offer, if you can.

3. Make sure you are comfortable with the process as you proceed. After you have spoken or met with two or three lenders and have found one that is offering a flat-rate personal or collateral loan, have them give you or fax to you a preliminary contract that you can go over by yourself without anyone there, so you do not feel pressured to accept it without having a chance to think about it and discuss it with your wife or husband. Do look online for their website, credentials, licensing and possibly any negative feedback that could be there. Check with the Better Business Bureau for any complaints.

4. Go over the proposal with your lawyer, your accountant, or whoever you trust to be able to spot unethical or unusual requirements or provisions. If you know someone at your bank really well, you can run it by them, if they are willing to look at it. If you want to add or take something out of the agreement, tell them. They are small enough where they can do that.

5. Pay off as much of your credit card debt as you can, starting with the highest interest rate card and next, the card with the highest minimum payment. This will free up money to pay the loan payment. You should be given a loan payment schedule showing you how much your fixed payment is and how much the loan balance is reduced each month. The loan will be paid off so much faster this way, with far less going to interest.

Tips & Warnings

• This is a great opportunity for small investors and lenders to help those who are in credit card debt, because investors are having some difficulty finding opportunities to invest their money that pay more than 2%-3% interest. In the next few months, due to the upcoming new laws under the Obama administration, credit card companies may be able to put more and more of a squeeze on us. Please do not wait to look into this avenue of saving yourself thousands of dollars. As my (very) small lender asked me, "Are you sure you don't want to borrow more, for maybe 20 years?"

• There are unscrupulous lenders, masquerading as legitimate businesses. Make sure that you know what you are signing and that you are dealing with a reputable small lender. You might want to put a "No pre-payment penalty" clause in it if it does not already have one. If a long-lost relative passes away and leaves you all his money, you might want to pay off this loan. Some lenders may not do it, but it is worth exploring.