Tag Archives: Debt relief

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.