Credit Card Debt Relief Options

By TOI Staff   November 14, 2022   Update on : November 14, 2022

Credit Card Debt Relief

If your credit card debt has overtaken you, it’s high time to act. As much as you may want to, this is no time to stick you head in the proverbial sand. You can neither wish nor worry your woes away.

The good news is that you do have options. Your task, then, is to carefully determine which one suits your situation best. To help you decide, here are your top credit card debt relief options.

What is Debt Relief?

Debt relief is a broad term that refers to any strategy that aims to shrink one’s debt load by working with creditors or other third parties, with the ultimate aim of erasing debt altogether.

Your Debt Relief Options

You have several to mull. Do so carefully, however, because not every option is right for you.

Speak Up

Your creditors should never be the last ones to know you’re in trouble. In fact, you should tell them first, before you are no longer paying them. They may have some recourse for you. For instance, your credit card issuers may be willing to lower your interest rate, waive fees, or change your monthly payment due date. It will never hurt you to ask.

Transfer Card

From time to time, credit card companies issue what are known as zero percent balance transfer cards onto which you can shift your higher-interest credit card debt. The rub is that you must be certain to pay off the new card before the promotional period is over and the rate shoots up, in a year or so. You also must have good-to-excellent credit to qualify for such a card.

Debt Consolidation

If you have the credit scores to pull it off, you can get a personal loan and consolidate your debt. Consolidation means rolling all your debt into a single payment, hopefully at a better rate. This strategy streamlines bill paying, since you’ll no longer have multiple credit card bills coming in with varying payments and due dates. The lower interest rate – shop around and get one, otherwise consolidation isn’t worth it – will save you money and allow you to pay off your debts faster.

Credit Counseling

These services are often offered for free by accredited counselors who can advise you on money management, help you create a budget, and if your situation is more dire, put together a debt management plan (more about that below) to help you pare your debts. You can find an area credit counseling agency through the Financial Counseling Association of America and the National Foundation for Credit Counseling.

Debt Management Plan

Depending on your situation, your credit counseling agency might suggest a debt management plan (DMP). With this, you make monthly payment to the credit counseling agency, which disburses the payment to your creditors. While you’re in the program, creditors typically won’t charge late fees or conduct collect activities.

Debt Settlement

With this credit card relief program, you’ll hire a company such as Freedom Debt Relief to negotiate with your creditors with the aim of getting them to allow you to pay less than what you owe to have your debt marked as settled. Creditors usually go along with the one-time payment in full since they realize that if you file bankruptcy – your likely next move, otherwise – they may get zilch.

With this debt relief program, instead of paying your creditors directly, you’ll save up your monthly payments. Once you’ve accumulated a sufficient amount, your negotiators will use the account as leverage. Your creditor will get paid once you sign off on the agreement.

Bankruptcy

This is often referred to as the solution of last resort – for good reason. Although it often does result in a free slate, the cost is high: a bankruptcy filing will live on your credit report for seven to 10 years, depending on whether it’s Chapter 7 or Chapter 13. During this period, you’ll find it very difficult, if not impossible, to garner any credit. You also could lose some assets, depending on the state in question.

As you can see, your credit card debt relief options are manifold. Just make sure you size up your situation then choose your solution  wisely.

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