If you feel that your credit card debt has grown too large, you can take steps to reduce it. There are several relief options, but all have the same goal: to help you pay back what you owe in more manageable amounts. At Perez & Perez, we can answer your questions about each option.
You’ll need a good credit score, but if you qualify, transferring a balance from a high-interest credit card to a lower interest one will help you reduce your debt faster, and with lower monthly payments. If you consolidate several cards into one lower interest one, you benefit from having to only make one payment a month, instead of several.
Not all lower interest cards are the same: read the fine print regarding fees. Even if the interest rates seem enticing, you should still shop and compare. Choose the ones offering the best overall terms.
Debt Consolidation Loans
These loans are similar to balance transfers but generally, offer even lower interest rates. Again, the better your credit score, the lower the interest rate you’ll be charged.
Most importantly, destroy the old card! If you transfer a balance to another card or consolidation loan and then charge up the old card, you are in bigger trouble than when you started.
Debt Management Programs
If you can afford to make payments but are facing very high-interest rates, you can consider a debt management program. These are offered by credit counseling agencies, who will reach out to your creditors and try to negotiate new terms that are more manageable for you. Keep in mind, however, that enrolling in a debt management program may harm your credit score.
This should be the last option, and should only be considered if you are not a good candidate for bankruptcy. With debt settlement, you pay back your debt for less than the entire amount, but it usually has to be in one lump sum. The harm to your credit can be just as bad as a bankruptcy, but some choose it out of a desire to avoid bankruptcy. This is only a good option if you have a lump sum readily available. Never raid retirement plans for the funds and never pay money to a company that says they will save up your money towards settlement.
Bankruptcy is not a four-letter word. Too many of our clients wait too long to consider bankruptcy as an option. It should not be the last resort…it should be one of the options to consider from the start when you realize you can’t pay your debts. Chapter 13 Bankruptcy can provide credit card debt relief by forcing your creditors to accept affordable monthly payments that are based on your income and expenses, not on what the creditors are willing to take. And in almost all cases, payments are made with NO interest!
If you have any further questions about the credit card debt, feel free to contact us at 765-588-5080. It would be our pleasure to assist you in any way we can.