Working out the best solution to erase huge amount of credit card debt

There are many people out there are who are searching everyday for debt solutions to come out of their excessive debts. If you are thinking that you are the only person going through this traumatic situation, you are certainly mistaken. There are a lot others in this country who are up to their eye balls in debt. Credit card companies make maximum amount of money by luring you into using their credit card. They will often offer you many attractive offers to tempt you. They want you to use your credit card excessively so that you reach to that point where you find it hard to make monthly payments and hence, you end up paying high amount of interests and fees on top of the principal amount to these credit card companies. There are many credit card companies who will mail you an application form. You just have to fill it, get approved for the credit card and dig yourself further into the hole. If you are not making a proper use of your credit cards, you will find yourself drowning deep in huge amount of debt. Here are a few steps to follow and you can begin the process of unburying yourself.

Pick the credit card on which you are having the least amount of money and work on paying off that balance first. Try paying more than the minimum balance so that maximum portion goes towards the principal amount and less is eaten up in interests and fees. This will also help you to pay off the credit card balance faster and then close that account. Cut off the credit card into four pieces and throw it away. Then you should move on towards paying off the credit card with the next lowest balance. While you are following this process, make sure that you are paying at least the minimum amount on the other cards so that the other credit card companies are not charging you their highest interests and fees. Repeat this process until you reach to the last card which needs to be paid off. You will realize that you are able to pay a decent amount of money monthly since that’s the only card left to be paid off.

The second step is to pay your credit card bills on time. Credit card companies earn maximum amount of money by charging excessive late fees. If you are gone late by just one day, you will be charged very high late fees. You can save yourself from such additional charges. Choose a credit card with the lowest interest rate and do not use it unless you absolutely have to. Otherwise you will find yourself in the same spot where you started from.

If you are having a hard time in managing your finances, and you have already got yourself into deep amount of debts, you should immediately consult a debt specialist. There are some reputed credit counseling or debt settlement companies who will help you in dealing with your creditors and work out a suitable repayment plan with your creditors.

Different types of credit card debt relief programs

Credit card debt relief can be offered in several forms. Sometimes, a debt solution can be perfect for someone in his present situation while it may be a different for someone else. You have to find the specific solution to your present financial situation. Here are a few options of how to attain a debt free life.

  • Credit card balance transfer:

A balance transfer is often considered to be the best option for someone having multiple credit card accounts at high interest rates and getting the whole balance transferred to another credit card account at a zero percent or lower interest rate. If you decide to use this option, you must commit to pay off the outstanding balance within the introductory period or else it will cost you very high interest rates after the introductory period. When you are shopping for a balance transfer card, opt for an offer that comes with a zero percent interest rate with no fees. If you are finding it difficult to find such offer, see which companies are offering the balance transfer option with a nominal fee of not more than $75. You should also consider the applicable rate after the introductory period is over.

  • Credit card debt consolidation loan:

If you have a huge amount of debt that cannot be paid back within the balance transfer offer period, then you should look for another alternative called credit card debt consolidation loan. This kind of loan is of two types: Personal and home equity loan. If you do not own a home or your home does not have enough equity, then you should apply for a personal debt consolidation loan. Interest rates are going to be higher than home equity loans, but less than credit card interest rates.

If you get qualified for a home equity loan, it will be a great way to pay off your existing debts. Not only you get a lower interest rate in the home equity loan, but it also happens to be tax deductible. You should be able to use the additional tax savings to pay down some of your other debts.

  • Credit counseling:

You can also contact a local credit counseling company in your area that will negotiate with your creditors and work out a lower repayment plan after negotiating for a lower interest rate on your credit card accounts. A debt counselor will review your debts, income and expenses, and work out a repayment plan. Once you are enrolled in the debt management program, you won’t be able to use your credit cards. The idea is to stop you from accumulating any further debts while you are in the repayment plan. In this program, you make one payment and this money is distributed to all your creditors in the consolidation program.

  • Credit card debt settlement:

If for some reasons, you are not able to afford the repayment plan in the debt consolidation program, then there is another option to make you debt free. A credit counseling service will recommend you debt settlement program. This program is also known as debt negotiation process and it reduces the total outstanding balances to something less than half. Keep in mind, when you are considering this program, it will have a negative impact on your credit ratings and you will have to pay taxes on the unpaid balance.

  • Bankruptcy:

Bankruptcy should be your last resort. Due to 2005 revisions in bankruptcy law, it’s now more difficult to eliminate credit card debts in bankruptcy. You’re more likely to be placed into a court-mandated payment plan. However, if you have other debts like high medical bills that prevent you from paying your credit card bills, bankruptcy may be an option.

Before deciding any of these credit card debt relief options, review the impact of each of this program on your credit ratings and financial future.