The burden of paying for a credit card debt can sometimes be overwhelming. You need to get your finances right and at the same time ensure that you pay your monthly premiums. It should be noted that the only way you can get credit card debt relief is by searching for an effective solution that will help you minimize your debt repayment charges. Your goal should be to find low-interest rates or even a way to completely eliminate the high-interest rates. This way, you will end up solely paying for the debt which means that you will clear it faster.
Credit Card Debt Relief Options
There are three main effective techniques that you can use to get debt relief and they include:
1. Enrolling in a Debt Management Program
This is a finance program that can help to educate you on how you can successfully manage your debts. It normally involves various strategic techniques that can be used to effectively eliminate unsecured debts like credit card debts.
How It Works:
- You will get to work with a counselor from a credit agency who will act as a negotiator.
- The certified counselor will first go through your finances including debts in order to determine if the management program suits you.
- In case it’s ideal for you, then you will get enrolled in the program and you will work together with them to find the right monthly payments you can make. All this depends on your income.
- It’s the task of the counselor to get in contact with your creditor because the readjusted payment plan has to be approved by the creditor.
- Lastly, they will or can negotiate with the creditor in order to lower or remove the high-interest charges.
What Should You Expect From a Management Program?
Well, if you are going to work with a good management company, here’s what you can expect:
- You will get interviewed and this will solely relate to all areas of your finances. They include income, expenses, credit card bills, utilities, and debts.
- It’s upon the counselor to verify your financial information using your credit card report.
- Based on your income, the counselor will try to determine your financial position and if the situation is critical, then you will get enrolled in a debt management program.
- Once you are in this program, the counselor will work with you to get a good budget proposal. This information will be later sent to your creditor. Thereafter, the creditor will issue a counter-proposal or they will approve it.
- The creditor has to agree with the new terms before the counselor requires your bank details in order for the monthly premiums to be deducted automatically. Your payments will always go directly to the counseling agency before it will get disbursed to the creditor’s account.
You will always get monthly statements from the credit counseling agency as well as the creditor. This is important so that you can make comparisons and ensure that the payments have been properly credited.
The Program Period :
A management program isn’t something that you can finish in a month or two. Most of them usually take 3 to 5 years to complete. So, this means that you need to be disciplined and committed to the program.
In case you decide to drop out of the program, then you will lose all the concessions the creditor made for you in relation to interest rates as well as the elimination of penalties for late fees among other things.
2.Using a Low-Interest Personal Loan to Consolidate the Debt
You can apply for a low-interest personal loan to help consolidate your debt. In order to do this effectively, you need to shop for a cheap loan. Compare interest rates offered by banks or credit unions. Besides that, you can try to look at what online lenders or other financial institutions offer. Make it your goal to find the best terms of agreements and low-interest rates.
But when looking for a low-interest loan, you need to understand that it normally comes with credit limitation. Low-interest personal debt consolidation is simply as a bank transfer. You need to have a good credit score in order to qualify for it.
Generally, the higher your credit score, the lower the interest rates you will qualify for when applying for a loan. A low interest should have around a 10% Annual Percentage Rate but you can get a good deal with 5%.
Generally, we encourage you to apply for a loan that suits your needs. Even though you should have a good credit score, don’t misuse the loan to pay other debts such as a mortgage or child care. The goal is to pay the debt.
Note: there are some lenders who are strict and want to ensure that you pay off your debt. So, the loan will be paid off directly to your current creditor.
Generally, make sure that you apply for a short-term loan. It shouldn’t exceed five years because the more the years, the higher the interest rates. Even if the monthly payments are low, paying for a loan over a long stretch of time usually means that you will end up paying more. It’s, therefore, important that you make the right calculations to avoid ending up with a bigger debt.
3.Going For Free Credit Counseling
The cost of a debt management program can be quite expensive for some people. Especially if you already have credit debt. While some agencies have a cheap one-time fee, you might not be able to even pay the monthly charges as well.
Even though free credit card counseling isn’t a solution in paying your debt, it will provide you with a clear overview of how you can pay your debt. The counselor will provide you with guidance as well as the support that you need regarding your consumer credit, budgeting, and debt management.
Research studies indicate borrowers or debtors who have a good understanding of money management usually settle their debts effectively. It should be noted that most of these free counseling services also try to negotiate with the creditors on the borrower’s behalf to at least get lower interest rates and eliminate penalties. These programs are also usually short and the borrower has no obligation. In summary, you will gain the following:
- A deeper understanding of how you can get out of debt
- Your eligibility for a debt management program
- How much you need to pay in case you enroll in a debt management program
- Year 5: 30% of the loan balance is forgiven including interest
How Do You know it’s Time to Get a Debt Relief?
- The total amount of your unpaid unsecured debt is almost half or even more than your gross income.
- You are not able to effectively repay your unsecured credit card debt
If that is the case, then you need to act immediately. It’s important that you clear your debts because this is something that is going to stick with you as long as you are alive. However, here is what you should understand:
- That the minimum repayment schedules put in place by creditors weren’t designed to help you clear your debt. Even though you might feel comfortable paying small premiums, you will definitely end up with higher interest rates. This is definitely where your creditor gets a good amount of revenue. So, they will keep giving you the minimum monthly premiums for as long as you want because this means that they will always earn more.
- Why is this so? Generally, minimum payments have high-interest rates. So, it means a huge chunk of the amount you are paying ends catering to the interest while a small amount goes to your debt. That’s why the smaller the premiums, the longer the repayment period, and the higher the interest rates. Why would you want to pay for one debt over 10 years yet you can do so in 5 years and lower interest rates?
- In the long run, you may end up facing difficulties when it comes to repayment. This is because your debt balance will still be high. Even if you make large payments, at some point they may fail to be effective. Overall, high-interest rates usually cause huge financial dents.
Use a Credit Card Payoff Calculator
If you want to have a good overview of how you can pay off your biggest debts, then you can use a payoff calculator. It gives you the best opportunity to review your budget and revise it by cutting down some costs in order to have more money for debt repayment.
Use the calculator, input your credit card debt balance, and current interest rate. In case there isn’t a repayment schedule, then simply check your statement or go ahead and choose 2%.
Go ahead and weigh these two options: making a huge fixed payment or pay a minimum amount plus some extra.
Note: in case you don’t like the outcome of this calculation, then is time you applied for debt relief. If you need help finding the best relief, Consolidate Credit has one of the best guides in place. You can give them a call or get in touch with them on this site
How Can You Effectively Find a Good Credit Card Debt Relief?
The best debt relief plan should help you to clear your debts without adding new financial problems. It shouldn’t even dent your credit card profile. However, you need to be careful because there are also bad ways to get a relief plan. Here are some of the good ways as well as the bad ways that you need to avoid.
Good Techniques to Find Credit Card Debt Relief
- Using a debt reduction plan
- Interest rate negotiation
- Signing up for debt management program
- Using credit card balance transfer
- Getting a personal unsecured debt consolidation loan
Note: we have covered all these good ways in different parts of our article.
Bad Techniques of Getting Credit Card Debt Relief
- Applying for a debt settlement program
- Getting a home equity loan
- Using cash advance loans or payday loan
- Cash-out finance
- Using retirement income
If you are going to apply the above-mentioned bad techniques, then you will end up in worse financial predicaments. You definitely want a plan that will leave your finances better than before. Let’s take a look at the following examples:
- If you are going to use your retirement income, there are chances that you may face penalties resulting from early withdrawals. This is a bad move because this is the money you have worked for all along and it means that you might have nothing during your sunset years.
- In case you use a home equity loan, then there are also chances that you might face foreclosure. Remember that if you can’t effectively pay the premiums then your property might end up getting repossessed.
- Lastly, in case you end up settling the debt but it has less than the amount you owe the creditor, then this will affect your credit score report.
What Do You Need to Know Before I Seek Relief for My Debt?
You need to be aware that seeking relief for your debt can make things worse. There are definitely people who are ready to make your situation worse by hiking the repayment fees. That’s why many people enter these programs and fail to fully sign up. You might even end up with debts that are significantly higher than when you were seeking relief.
While this may be a chance for you to start afresh, you need to be very careful if you want to make real progress. So, before you sign any agreement, here is what you need to understand:
- What do you need in order to qualify?
- What is the amount of fees you will pay?
- Who are the credit collectors?
- Will this relief plan have any tax implications?
How Can You Effectively Pay Low Premiums?
While you might be eligible for the credit card debt relief plan, it’s also important to ensure that you can effectively pay the regular premiums. But how can you ensure that these premiums are lower to avoid overburdening yourself? Well, there are two ways you can go about this:
1. Use a Debt Reduction Strategy
This is one of the most effective debt plans that allow you to plan your bills and then make the biggest payment possible on just one debt each month. It’s a strategy that can help you to stay up to date with your debt obligations. It should be noted that a debt reduction plan is usually modified to suit your needs so that you can pay off debts faster.
It’s a personal pay off plan that you need to set up if you want to eliminate debt. Its main goal is to ensure that you find the fastest way possible to get out of debt. On the other hand, the plan should help you attain the lowest interest rates possible. Here is how you can effectively use a debt reduction plan:
- Understand your financial situation
- Assess your current financial state and then your debt situation. Avoid making guesstimates and get real with a pen and paper or a calculator.
- Consider debt consolidation. This can help to significantly lower your interest rates. Getting a debt consolidation loan gives you a chance to repay all your debts at once and, therefore, you will have only one monthly payment to make and this often comes with lower interest rates than what you could be paying currently.
- Create a budget reduction plan and stick to it
- Create a financial budget that has been customized based on your income and needs and then go ahead and create an effective reduction strategy.
To effectively implement a debt reduction plan, check out what Consolidate Credit offers.
2. Negotiate for Lower Interest Rates
Simply ask your creditor if it’s possible to reduce your interest charges. If your creditor approves this, it means that most of the payments you will be making will go towards your debt rather than the accumulated interest charges. As a result, this will enhance the repayment process, especially if you are paying large sums of money. However, you need to be careful when seeking low-interest rates. This is because credit will only agree if:
- Your payments are up to date and there is no case of defaulting
- You have been their loyal customer
- You have a good credit card score
Note: in case you can’t effectively negotiate for lower interest rates and you really need it, then you must consider hiring a team of experienced professional negotiators.
Credit card debts can sometimes be overwhelming to pay. However, the above-reviewed three techniques can help you to effectively manage your debt. You simply need to have the right knowledge regarding finances and how to effectively eliminate debts. It’s also important that you apply for a low-interest debt consolidation loan. This way, you will find a successful way of eliminating debt.