Question: > I assumed their business model was to buy out the credit card > balance because the person I spoke to gave me immediate quotes on the > lower interest rates that I could be paying on each card if I signed up > with them. Does anybody know if some of these companies actually buy > the loans and profit from the interest rate?
Answer: OK as far as it goes, but if you have a 0% teaser, that balance is now your lowest rate, and it makes much more overall sense to pay as much as you can on the highest rate balance remaining. If you have $20,000 out there at 20%, and you can move $10,000 to a 0% teaser, you’re better off paying on the $10,000 that’s still at 20%. That way, you maximize the benefit of the “free ride”.
I was hoping these consolidation companies just buy out credit card balances so they can make money off the interest or sell the loan to another company. Unfortunately, from what I’ve read so far, that’s not what they do. If their business model is to negotiate for a lower interest rate and manage these accounts by charging fees, I’m not sure whether this is a good thing. I’ve heard really bad stories from people who signed up with these plans. I assumed their business model was to buy out the credit card balance because the person I spoke to gave me immediate quotes on the lower interest rates that I could be paying on each card if I signed up with them. Does anybody know if some of these companies actually buy the loans and profit from the interest rate
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