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Home » Credit Card Debt Relief: Your Options & All You Need To Know

Credit Card Debt Relief: Your Options & All You Need To Know

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Need help with credit card debt? Get familiar with and find yourself the right Credit Card Debt Relief – The current financial crisis around the globe has increased the risk of credit card debt issues for many individuals.

Often, people facing income loss and unemployment most times rely on credit cards to cover bills and necessary expenses.

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However, several financial setbacks like unexpected bills, medical issues, etc. have led many to fall behind on credit card payment. Fortunately, to avoid the risk of bankruptcy and heavy debts, Credit card debt relief could be a faster and easier way to regain stability.

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Interested in knowing more? Carefully read to the end!

What Is Credit Card Debt Relief?

Credit card debt relief is a process where a debtor tries to persuade a lender to accept a particular sum that is less than the full debt as a sign of repayment. Narrowly, it is a relief fund that enables the outstanding balance of a debtor to be reduced or paid off.

There are many companies, organizations, or programs that help borrowers to manage their debts while minimizing interest and late fees. You might have also heard about credit card debt forgiveness alongside the meaning of debt relief. Forgiveness in this concept means that your creditor has paid off your balance entirely, while relief means that you will still have to pay back the amount you owe.

Top Credit Card Debt Relief Options to Consider

The debt relief process can be approached in several ways. Not all of these options work for everyone, so it’s better to thoroughly research which is the best suited for your situation.

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  1. Contact Your Lender

Firstly, reach out to your creditor to know if they are willing to work with you. This is because, according to the Consumer Financial Bureau, some creditors might be willing to waive a certain fee, reduce your interest rate, or give you more time to meet up with payment. However, to do this, you have to follow certain processes as recommended by The Federal Trade Commission.

Steps:

  • Reach out credit card company, using the contact information provided on your billing statements.
  • Explain to them why you haven’t been able to make your monthly fees as agreed.
  • Give two or three suggestions that think would help you get caught up as soon as possible.
  • Request that the borrowers should temporarily reduce your interest rate.

However, there is a need to note that, Credit card issuers are not to give you any type of concession or waive fees. Also, your lender might request you pay a lump sum within a specific period in exchange for reducing your waiving fee or remaining balance.

2.   Credit Card Balance Transfer

This is another effective debt relief for credit cards. It has to do with transferring debt from a credit card with a high-interest rate to another that has a lower interest rate.

If you have a good credit score and you are qualified to make a balance transfer, you might be able to secure a lower interest rate, which automatically helps you pay down your principal debt faster.

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Although this credit card debt relief program will not reduce the total amount you owe, it will enable you to combine different credit card balances into one,  thus repackaging your debt and reducing your expenses.

Steps:

  • Make a balance transfer with a credit card that has a lower interest rate than your existing credit card.
  • Transfer your credit card balances to the new credit card.
  • Make the largest payments you can afford to reduce interest charges. If you can’t do that, transfer the little you have until you can pay more.

However, you must know that balance transfer comes with many risks and can be complicated. Also, you might be charged a balance transfer fee which is usually a percentage of the amount you transferred.

Importantly, to benefit from this method, you have to pay off as much debt as you can quickly before the promotional rate ends.

3.   Consolidate With A Personal Loan

This is also one of the credit card debt relief to consider. Here you are to consolidate your debt into a lower-interest personal loan. Here, you will have to take a personal loan that has a lower interest rate, after which you will use it to pay off your credit card debt.

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This method will give you the chance to pay off your debts quickly with a simplified monthly payment.

Steps:

  • Find a lender that offers the best terms and rates for your credit score.
  • Apply for a personal loan
  • Once your loan is approved, use the funds collected to pay off your credit card debts.
  • Make monthly payments till you pay off the balance is paid in full.

However, note that using a personal loan will not reduce the amount of money you owe your creditors. Also, ensure you use a loan term that works perfectly for your financial status.

A shorter loan might mean low Interest but larger monthly pay while a longer loan can mean a small Monthly pay but a high interest.

  1. Debt Management Plans

This is also one of the best credit card debt relief programs that work. Basically, a debt management plan allows you to pay your credit card debt in full, but at a reduced interest rate.

You make a lump sum each month to a credit counseling agency, which will help you distribute it among your creditors.

Important Tips To Note | Debt Management

There are many credit counselors and credit card companies that offer long-standing agreements that help debt management clients.

However, there is a need to know that Credit counselors do not negotiate a reduction in the amounts you owe. Even if they are nonprofit organizations, they will charge you for their services.

Be sure to choose a  credit counselor that is reputable, accredited, and certified, and that you trust can manage payments on your behalf.

Importantly, you have to note that your credit card account might be closed until you are done with the management plan. This is why most people don’t choose this method because they might have to live without credit cards for a long while.

Another disadvantage of this is that, once you miss the payment, you will be knocked out of the plan. Therefore, you have to understand the fees and alternatives you can choose to deal with your debts.

  1. Bankruptcy

Debt relief through bankruptcy is the last resort for anyone in debt. What’s the point of choosing other credit card debt relief programs if you are not going to be capable of fulfilling the terms of payment as agreed?

This is why bankruptcy is recommended if you’ve gotten to that stage where you can no longer pay your debts. However, ensure you consult a bankruptcy attorney first before you go through with any programs for debt relief. This will determine if you should go through with this method or choose credit card debt relief options.

Forms of Bankruptcy

There are two forms of bankruptcy: Chapter 7 and Chapter 13. The most common of the two is Chapter 7 and it is one that can erase most credit card debt, enormous medical debt, and unsecured personal loans.

Chapter 7 Bankruptcy – Overview

Chapter 7 Bankruptcy can be done within three to four months if you qualify.  Below are a few things you need to know:

  • It doesn’t erase or reduce taxes owed, child support obligations, or student loan debt.
  • It will devalue your credit scores even if you rebuild it and stay on your credit report for up to 10 years. This will be of great disadvantage to you because bad credit history will limit and affect your eligibility for certain jobs, you will have lower chances of getting an apartment lease, and your insurance cost would most likely be costly.

Although bankruptcy may allow you to rebuild your credit scores much sooner but then, it comes with serious aftermath.

  • It requires you to get a co-signer or guarantor, automatically making the person solely responsible for the debt.
  • If debts continue to pile up and are not reduced with the first chapter 7, it is until after eight years that you will be eligible to file another Chapter 7 bankruptcy.
  • It is not recommended that you would have to give up essential properties and other valuables you want to keep. Although the requirements vary from state to state, certain kinds of property are exempt from bankruptcy.

Some of them included motor vehicles up to a given value and part of the equity in your home. However, you will most likely have to give up a second car or truck, vacation homes, family heirlooms, and any valuable collections.

Also, not everyone with overwhelming debt qualifies for this credit card debt relief program. If your income is the median for family size and state or you have only a house that you can’t afford to lose, you might need to opt for Chapter 13 and 7 bankruptcy.

Chapter 13 Bankruptcy

The Chapter 13 bankruptcy plan is a three to five years court-approved repayment plan, that is based on your debts and income. If you can stick with the plan for its full term, the rest of your unsecured debt will be discharged.

However, it takes longer than a Chapter 7 but if you are consistent with payments,  you will get to keep your property and even have some of your debts discharged. This plan also affects your credit report like chapter 7, but only stays for seven years from the filing date.

Things to Avoid When in a Bad Debt

The majority of the time, overwhelming debt leads to devastating situations such as health crises, unemployment, broken home, and even natural disasters.

Although, being in bad debt can be depressing, however, below are a few things you should not do:

  • Don’t pay a secured debt such as a car payment late so that you’ll be able to pay an unsecured one like a credit card. If not, you could lose the collateral that secures your car debt.
  • Don’t borrow using your homes as collateral. You will be putting your shelter at risk of seizures and you may be turning it into an unsecured debt that could be wiped out in bankruptcy.
  • Don’t withdraw money from your retirement savings to settle an unsecured debt. This is financial suicide!

Conclusion

In all, don’t make decisions based on the pressures you get from collectors, it might lead you to make rash ones. Instead, do your research, consult a professional and opt for any of the debt relief programs that best suits you.

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