(ARA) - Until recently, Ken Goins of Woodland Hills, Calif. was like most Americans -- he carried a balance on several credit cards. The weight of the balance became heavier and heavier, and Goins just wanted to end his debt.
The average American has 13 credit obligations on record at a credit bureau, and 36 percent of Americans carry more than $10,000 of non-mortgage debt, according to myfico.com.
Credit card debt is often necessary for large or emergency purchases, but as interest rates climb, carrying the debt long term can become unmanageable and unwise. Goins hit that point a few months ago, when he was making little headway trying to pay off $65,000 in credit card debt at a painful 12 percent interest rate.
The downturn in the economy has been a wake-up call to many debt-heavy consumers like Goins. More than ever before Americans are examining their options for paying off debt faster, or lowering sky-high rates. Typically these options include:
* Continuing with minimum payments.
* Playing the costly balance-transfer game.
* Using outside debt consolidation services.
But now, there’s a better option. Consumers are turning to their social networks for affordable financial relief -- and a light at the end of the tunnel. A loan from a relative or friend usually means a lower interest rate (which adds up to significant savings over time) and more flexible terms. Because these kinds of loans have been known to strain even the fondest relationship, it’s a good idea to bring in a third party, like Virgin Money, to help document, service and automate the process.
A social loan managed by a third party is similar to a traditional debt consolidation service. For example, consumers can combine multiple high interest-rate credit cards or other debt into one loan. The big difference is that the borrower and lender agree to their own rates and terms. Credit reporting is even available, enabling the consumer to improve their credit score while paying off their now-affordable social loan.
Goins' friend wanted to help him out with his debt, and had read about how he could make the loan official with Virgin Money. Here's what they investigated:
* Continuing with his $700 monthly payments, it would take Goins more than 22 years and $120,000 in interest -- paid to the card companies -- to get him out of debt.
* When Goins looked to his network, he connected with a good friend and a sibling both willing to help him out. For a few hundred dollars in fees, he was able to arrange a loan with each, formalizing the agreement and automating his repayment.
* All parties agreed to a 7 percent interest rate, higher than the two lenders were receiving on their fixed income investments, and significantly lower than Goins’ credit card rate of 12 percent.
* Goins now makes those same payments of $700 a month, but will be done in 11 years for $28,000 in interest -- money paid to those he loves.
With a social loan, Goins’ repayment is not only much cheaper, but also hassle-free thanks to Virgin Money’s e-mail reminders, electronic funds transfers, online accounts, year-end reporting and free credit reporting. “We’re thrilled to help consumers get the best deal possible and empower them to be in charge of their debt. That’s exactly what we’re here for. What better way then to get a friend or family member to invest in you?," says Asheesh Advani, chief executive officer of Virgin Money on the sharp rise in use of the company’s debt consolidation products in recent months.
Learn more about free debt consolidation or refinancing at www.virginmoneyus.com.
Courtesy of ARAcontent
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