Eliminating credit card debt—what are the options?
Call your credit card companies
Once you realize that you have challenges meeting your monthly payments, call your credit card companies and see what assistance they offer. Some will provide a structured program of reduced payments for a certain number of months, while others will lower your interest rate to stop your card balance from continuing to climb so quickly while you work to pay it down.
Consider using a personal loan to consolidate your debts. Personal loans typically have interest rates that fall below credit card interest rates. You might find additional relief from only having one payment each month on your loan instead of several credit card payments.
Your credit score and other factors determine the interest rate and amount you can borrow, so consider this option before your credit score becomes severely impacted by late or missed payments.
Credit counselors and debt settlement agencies
These debt relief companies help assess your finances and work out a repayment plan. Credit counseling involves working with someone who helps you renegotiate interest rates and payments with creditors while preserving your credit score.
Debt settlement involves a third party negotiating with credit card companies on your behalf to settle your debt for less than you owe. While this may work, it will negatively impact your credit score. Both agencies may also charge you a fee for their services.
Sometimes, the best option to free yourself from overwhelming debt involves filing for personal bankruptcy protection. This strategy might be a last resort, but as soon as you file, your creditors will no longer be able to contact you or attempt to collect. Bankruptcy can discharge several types of debt, relieving you of any legal obligation to repay.
Sometimes, you can keep assets such as your home and car. While bankruptcy may feel like your least favorable option, it has given many people a fresh start and significantly improved their financial situation.
Take control of your financial future by exploring the best options for settling your credit card debt.