Credit cards debt can be very hard to get out of. The high interest rate and various fees makes your balance grow very fast. If you are not careful, you may end up with more debt than you can handle. As soon as you realize that your credit balance is getting out of hand, you need to act fast.
One of the most effective ways to get out of your credit card debt is through debt consolidation. Among the other choices, this is the program that will not have too much negative effect on your credit score. In the beginning, your score may dip lower but that will soon increase when you start paying off your debts based on the payment plan of the program.
The whole idea of debt consolidation is to combine your debts into one easy payment. So if you have more than one credit card debt and all or most of them are maxed out, then this is the right debt relief option for you. The consolidation of your credit accounts can be done in two ways.
The first is known as debt consolidation loans. This method begins with a loan application. The amount that you will loan should be big enough to cover the total amount of your credit card debts. Make sure that you check the interest rate of your new loan. It is ideal that it should be lower than your current APR. If it not then you may want to rethink your options. Once your loan is approved, you can pay off your credit card debts so they all return to zero balance. After that, you can concentrate on paying off the loan – which usually takes 5 years to complete. That depends on the details of the loan that you got. Most of the time, the monthly payments become lower because the combined debt amount is stretched over a longer payment period and the interest rate is also lower. At least, when you are shopping for a loan to apply for, this is what you should aim for.
The other option is debt management. This actually begins as credit or debt counseling. You get in touch with a third party company who will assign a credit counselor to you. This counselor will help analyze your finances to understand just how much you can afford to pay for your debts. It will be compared to the minimum payment requirement of your credit card debts. If your debt payment fund is not enough to cover the minimum, the counselor will put you in a debt management program that will allow them to negotiate with the creditor on your behalf. They will request for a longer payment term so that your current balance will be stretched over a longer period. That will result in lower monthly payments that your finances can afford. You will then follow a debt management plan or DMP that the counselor will monitor. You will send you payments to the credit counselor and he or she will be in charge of distributing payment to your various creditors.
Regardless of what you will choose between the two options, you will need a steady income to be able to support your payments. Remember that there will be no reduction on your credit balance. You should also make sure that you curb your credit card spending. Knowing how hard it is to get out of this debt, you need to make sure that you will avoid that pitfall in the future.