Debt is not always a bad thing, especially if you keep it under your control. Unfortunately, sometimes situations like the current pandemic can cause your debt to spiral out of control. According to the federal reserve report, the outstanding total consumer credit card debt in January 2021 was $965 billion at an interest rate of 16.28%. The figures explain why credit card relief programs are invaluable.
A credit card relief program helps to restructure debt in a way that eases up the pressure to pay off your credit card debt. The relief programs focus on solutions that work well within your financial situation. However, the programs aim to eliminate or reduce interest rate charges. The aim is to enable you to pay off the debt within a shorter time than expected.
Although there are various solutions for debt relief, how do you establish the right option for you? Credit card relief companies provide credit counseling services. During the counseling sessions, a certified credit counselor assesses your credit, budget, and debt to establish the best solution for you. The counselor provides all the information needed and allows you to make an informed decision. Here are some of the best debt relief for a credit card:
1. Debt consolidation
Debt consolidation is where you use one loan to pay off the other credit card loans. The plan makes it easy to pay off the loan, and you may end up with a lower interest rate.
Debt consolidation is successful when:
- You have a stable cash flow to pay off the single comfortably
- Your debts do not exceed 40% of your gross income, excluding mortgage
- You have a strategy to prevent being in such debt again
- You have a good credit score that guarantees low interest or zero credit card consolidation loan
You can rely on debt consolidation loans, home equity loans, or credit card balance transfers to manage the debt.
2. Debt settlement program
The best thing about a debt settlement program is that you pay less money faster. Unfortunately, the program hurt your credit history. So how does it work?
You open a debt settlement account where you deposit money every month. A debt settlement company houses the account. The creditors negotiate with your creditors only after you have saved sufficient cash to settle the debt.
To enable you to raise the cash quickly, some credit card companies discourage you from making monthly payments to your creditors. If the program will hurt your credit score, why strain to make the payments, and you are already working out a plan to settle the debts?
When you raise enough money, the agency reaches out to your creditors to strike a deal. When they agree on a settlement, each creditor receives a fraction of the money you owe them, and the deal is settled.
If you have tried all the other credit card relief programs and none works well for you, bankruptcy is the last option. Due to the effects of filing bankruptcy, it should always be the last option. For personal bankruptcy, you either pay your debt in 3 to 5 years or 6-8 months. The information on the varieties is found here in Chapters 13 and &7.
4. Debt management
Debt management is an assisted credit card debt settlement where you do not need new financing to settle your current debt. A debt settlement company helps you to come up with a flexible repayment plan according to your budget. The company negotiates with your creditors on your behalf. The negotiations aim to lower or eliminate your interest rate.
If your creditor and credit counselor agency agree on the interest rate and monthly contribution, the program starts. The agency makes the payments on your behalf, but you need to make the agreed monthly contributions. The agency then distributes the money amongst your creditors.
Fortunately, the program does not damage your credit since you pay your debt in full.
5. Do-it-yourself option
The credit card relief option depends on your ability to negotiate. Instead of hiring a credit card relief company, you reach out to your creditors to negotiate a settlement plan. Just like for professional companies, you can negotiate for lower interest rates or reduced loans.
However, if you want to negotiate a workout plan, the accounts should be with the original creditor, and it should not be closed. The workout plan is similar to the debt management plan, but you negotiate with individual creditors here.
For debt settlement, either you or the creditor initiates the process. You can reach out to them and negotiate a lower balance or call you and make a suggestion. However, you need to have lump sum money as most creditors do not accept partial payments for individual debt settlement plans.
6. Credit card validation
A credit card debt relief company seeks to determine if the collecting agency is following the set laws. If there is a breach in one law, the debt is declared uncollectable.
Credit card debt can be such a pain, but you do not have to spend sleepless nights if you do not a way out of the pitfall. Talk to a reliable debt relief company to help you today.
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