The task of ridding yourself of credit card debt can be intimidating. After all, you know the trouble you’re in, and how long it took to get there. The good news is that you have options that can help. Here’s what you need to know about coping with credit card debt.
From debt avalanche to debt settlement, there are several ways for you to erase that worrisome debt that you’ve been lugging around. See which option best suits your circumstances and go from there.
With this approach, you combine all your credit card debt into one payment, which streamlines bill paying since you no longer have multiple payments of varying amounts and due dates.
You can consolidate with a personal loan or balance transfer card (more on the latter shortly). The key is to qualify for a loan with a lower interest rate than the one you’re now paying in the aggregate. Otherwise, consolidation doesn’t make much sense. If you can get a better rate, not only will you save money, but you can erase your debt faster.
You can get a personal loan from a bank, credit union, or online lender. You’ll need good credit, at least, though, to be eligible. Most online lenders can “pre-qualify” you with a non-damaging soft credit pull. While such qualification isn’t an approval, it will give you some idea of what you’re eligible for.
You can also consolidate your credit with one of those balance transfer credit cards that companies sometimes issue. You’ll need good-to-excellent credit for one of these puppies, which offer 0%-interest for a promotional period. If you can get one, you can transfer your highest-interest balances onto it. Just make sure you’re able to pay off your debts before the introductory period ends – usually in 12 to 18 months – and the old, higher rate once again is effective.
With this credit card relief program, you can hire a debt settlement company such as Freedom Debt Relief to negotiate with each of your creditors to get them to allow you to make a one-time payment in full of less than what you owe to “settle” your obligation. Creditors typically go along because they know that if they don’t, you’ll likely file bankruptcy, which would likely net them zero.
How it works is, after an initial consultation and the creation of a personalized plan, you’ll be asked to deposit money monthly into an escrow-like account. Once you’ve saved enough, your company will go to your creditors on your behalf. After each obligation is settled and approved by you, the creditor will be paid from your account.
With this do-it-yourself strategy, you pay off your balances in the order of the highest interest rates, rinsing and repeating until they’re all paid off. Because you’re jettisoning all that high-interest debt first, you’ll save quite a bit of dough.
If you’re the type of person who needs an early momentum booster, then debt snowball may be for you. Why? Because with this method, you pay off your accounts from the largest to the smallest. And erasing that first big debt will give you the motivation you need to keep going.
As you can see, there’s a lot that goes into coping with credit card debt. The most important factors in your outcome will be persistence and determination, particularly when it comes to budgeting and making sure spending is curbed. Otherwise, just pick a program that works for your situation … and see it all the way through.