If you would like to manage or resolve your credit card debt, there are many options available that you can look at in order to achieve this. The option that you eventually go for will depend mainly on your particular debt situation. Before settling on a technique for managing your credit card debt, it is important that you look at all the alternatives on the table so you can see which one (or a combination of two or more) is best suited for you. Below are some of the major options that you can consider.
Credit Card Balance Transfer
If you have multiple credit cards, a convenient way of resolving your credit card debt is by transferring the balances on all the cards onto one credit card and then working at paying off the consolidated credit card balance. You will need to identify the credit card that has better repayment terms and interest rates than that of any other of your current credit cards. Sometimes, friendly terms on credit cards last for a fixed period of time as part of a promotion and you therefore need to work hard and be disciplined enough to pay off your entire credit card debt within the offer period.
When looking for the credit card to transfer your balances to, you should not only get the one that charges the lowest interest rate, but one that will charge very little or no balance transfer fees. You should also consider the interest rate that will apply after any friendly terms offer expires. Together with this, find ways of reducing your expenses or increasing your income so that you can increase your monthly repayment towards clearing the singular credit card balance. Work towards repaying more than the minimum instalment required each month to reduce the total time it takes you to clear the debt.
Credit Card Debt Consolidation
Credit card debt consolidation involves taking a loan to pay off the balances on your credit cards. You can take a personal loan or a home equity loan and use it to knock off your credit card debt. The goal here is to take a loan that has a lower interest rate and longer tenure and therefore allowing you to repay instalments more comfortably. Between the personal loan and the home equity loan, a home equity loan is preferred because it has even lower interest rates and these rates are usually tax deductible thus giving you more disposable income. The drawback of a home equity loan is that the loan is pegged to your home and failure to pay off the new loan could lead to an even bigger problem than credit card debt-foreclosure on your house.
Credit card debt consolidation must go hand in hand with personal discipline on managing credit card debt. This is because since the debt is now consolidated into a single loan and the repayment seems relatively low, the zero balances on one’s credit card balance can lead one into self delusion of being ‘free’ to start spending uninhibited. If one does not change their spending habits, they can very easily find themselves in an even worse situation of credit card debt as well as a home equity or personal loan. Therefore, before consolidating your credit card debt, ensure that you thoroughly review your spending habits and discipline yourself such that your expenses are consistently way below your income.
Credit Counselling Services
You will sometimes need external help in analyzing your current debt problem and coming up with something that works. This is where credit counselling comes in. The credit counsellor will assist you in reviewing your current situation and help you develop a credit card debt relief plan that actually work. The counsellor will also negotiate for better interest rates for you with credit card companies and will then take up the responsibility of making the monthly repayments on your behalf.
This often means that you will make a single monthly repayment to the credit counselling firm and they will then distribute the payment to the various credit card companies. Often credit counselling services require you to hand over your credit cards so that you do not increase your credit card debt.
Credit Card Debt Settlement
If you are completely unable to make monthly repayments for your credit card debt, you should consider debt settlement. Debt settlement, also referred to as debt negotiation or a consumer proposal, entails negotiating with your credit card company to reduce the current debt balance usually in exchange for you clearing the new agreed balance. Debt settlement has been known to reduce a debt balance by up to 40% of the original amount. Credit card companies will consider this option when they want to avoid losing money in the event that a client files for bankruptcy protection. The main problem with debt settlement is that is has a negative effect on your credit rating and you may have to pay tax for the debt balance waived.
About the Author: Mirsad Hasic is the webmaster and editor of Best Credit Card Deals, a site where you will learn how to pick a credit card that suits your current needs. You can also subscribe to his RSS feed!
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- The 5-Step Guide to Getting Out of Credit Card Debt
- Get Rid Of Your Credit Card Debts
- 1 Year and Credit Card Debt Free!
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Lot of considerations are at stake when dealing with credit card debts especially with the multiple balances. Evaluation is very essential in order to decide on the best solution possible and to achieve an effective repayment plan.
Yes, I agree with you on the above. It just cannot be over-emphasised that not all debt relief options would work for everyone who is deep in credit card debt.
The debtor needs to analyse his financial position, source of income and monthly fixed expenses before choosing the right strategy to reduce and finally eliminating the credit card debts.
John Stonor´s last blog ..Avoiding Debt Relief Scams
was working two jobs and sleeping only four hours a day. I tried my best to keep up with my credit card payments by making at least the minimum payments each month to avoid delinquency. One day I took a good look at my statements and realized that most of what I had been paying to my creditors was going towards the interest. I called a couple of my creditors in an attempt to make some kind of arrangement to pay off my debts but because I had been making my payments they refused to work with me. I decided then to go online to research other options. I went on google and looked up the word debt settlement and found a company call “The National Debt Relief Group”. I chatted with one of their reps online and received information on their program. I eventually called their office and spoke with them about what options were available for me. I signed up and now fifteen months later I no longer owe any of my creditors. If you find yourself in the same situation contact them. I was amazed at how nice the representatives were and how patient.
Debt Settlement
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