Credit Debt Relief: An Overview of Your Options
So you have credit card debt. Whether it’s student loans or your weakness for designer garb that finally did you in, even the most innocent of swipes could have led you here. But it doesn’t have to break you. So, enough with the guilt—let’s get down to business. For many people who realize that their debt has become a problem, the biggest issue is knowing what to do about it. Keep reading for an overview of credit debt relief options available to you. The options that follow can help you manage your debt and improve your credit.
Credit Debt Relief Overview
Assess The Damage
The first step is to determine your overall debt. You can check your most recent account statements and your credit report for free. Once you have your list, it would be preferable to prioritize your debts in order of consequence. Secured debts that are tethered to your car or home rank the highest because your ownership of those things. The next set of debts for credit debt relief on the list should be the ones with the highest interest rates; debts that will incur the highest penalties for missed or late payments, so ridding yourself of them first will save money. It’s especially important to rank your delinquent accounts in order of risk if you are already struggling to keep up with the payments. It is essential that what money you have is going down on the most important bills.
The next order of business in credit debt relief is to decide how to tackle your debt. You can look at your debt in relation to your budget and create a plan. Much like a diet, your plan for credit debt relief will only work if you can stick to it. Here are some options to consider.
DO IT YOURSELF
While credit debt can often make you feel helpless, enacting credit debt relief can give the control back to you. Your prioritized list will tell you how much you owe on your accounts. If any of the amounts on your open accounts look too treacherous, look to handle it soon. Make sure you do the proper research before you take your debt into your own hands. Negotiation for a modified payment plan or a reduced interest rate can result in instant DIY credit debt relief. Other simple tricks to stretch your budget (like mitigating your spending) go without saying.
If your debt outweighs your ability to pay it back, it may be time to consider seeking third-party assistance. Credit counseling can be a useful tool for assessing the damage and exploring your options. The role of credit counselors is to ensure that you make an informed decision on handling your debt. Here are some things a credit counselor might suggest:
- Balance Transfer—take the balance off of credit cards with high interest rates and transfer it to a different card with lower rates
- Debt Consolidation Loan—move multiple credit card balances to one account with a low interest rate
- Debt Management Plan—the credit counseling agency negotiates adjustments with your creditors on your behalf, and you just pay one monthly payment to the agency for this service
- Debt Settlement—the option to negotiate with your creditor(s) to reduce the repayment amount
- File for Bankruptcy—declaration that you cannot fulfill any financial obligations, and all debts are cleared
Keep in mind that each of these options has its pros and cons. For example, balance transfers and debt consolidation loans require decent credit, while debt settlements and filing for bankruptcy can be detrimental and do damage to your credit. If you are not consulting a credit counselor, be sure to get all the facts about each option before you make a decision.
Whatever action you choose to take to handle your credit card debt, make sure you follow up afterwards to make sure your credit score reflects it. Be sure to check your status with all three credit bureaus (Equifax, Experian, and TransUnion) at intervals to stay on top of your credit reports. Once your debt is cleared, you have the opportunity to start rebuilding your credit. With your new knowledge of how credit works, you’ll be less likely to fall into that trap again.
AnnMarie Bemberry is an up-and-coming freelance writer based in NY. When she is not writing about debt relief solutions, she is enacting them in her own life as she works toward perfect credit and her next degree.