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Credit Card Debt Solutions
Credit Debt Relief
A Six Step Plan for Credit Debt Relief
Debt To Wealth | Credit Card Debt Solutions
Credit Debt Relief is part of a series on Credit Card Debt Solutions.
I am convinced that one of the reasons my wife and I have been able to build wealth on our single income has been our choice to avoid credit card debt. Unfortunately, because of credit we “enjoy” the ability to buy what we want now regardless of whether or not we have the money for it.
The availability of easy and abundant credit makes this all possible. Unfortunately it is easy to let caution wane and take advantage of many of these offers for easy credit. If you are not cautious, a mountain of credit card debt is the result. This can leave you seeking credit debt relief as the only answer when the “mountain” is too steep to climb.
So how bad is it?...
There are over 181 million credit cardholders in the U.S. that have, on average, 3.5 credit cards in their wallets.
At the local credit bureau, the family will have no less than 13 credit obligations on its report, and an average balance of credit card debt of $14,750 at a 14% interest rate.
These accounts include department store cards, gas cards, and bankcards, but also installment credit related to auto loans, home loans, and in some cases, student loans. Total consumer debt in the US exceeds $2.5 trillion.
The typical progression when seeking credit card debt solutions had become to refinance your home, to convert the credit card debt into mortgage debt such that the interest can be deducted for tax purposes. However, this is nothing more than temporary credit debt relief since all you did was transfer debt from one account to another.
To make matters worse many people that did this in the 2003-2008 period or so are now finding themselves owing more on their mortgages than what their homes are worth due to the slump of the real estate market nationwide.
So what are your options when seeking credit debt relief?
- Assess Your Current Status - go on to annualcreditreport.com and get your most recent credit report so that you can see how much you owe and to who. Then make a list of your current monthly payment obligations, the credit grantor’s name, the current interest rate, and your outstanding balance.
- Have a Plastic Surgery Party – if after you make your list you find out your debt is spiraling out of control then it’s time to cut up all those credit cards. Literally cut them up and don’t use them again. If you are in a hole you cannot get out by digging.…so you have to stop adding to your debt.
You might not want to close the account especially if it has been opened for a long time since it can lower your credit score. This is debatable as your score will eventually recover and it is better to break off the relationship with the credit card company so you don’t fall on their trap again. So if you can stop yourself from using it then leave it open, otherwise close it.
- Review Your Entire Home Budget - if you don’t have one you will now have to create a home budget by categorizing your income and payment history over the past three months or more. Your objective is to determine how much you can apply against your credit debt relief after you cover your living expenses.
- Lower Your Interest Rates – yes you can lower your interest rates on your credit cards just by asking. Call them up and ask them to lower your rates or tell them you will close the account and move the balance somewhere else. Be firm and persistent.
- Start Your Debt Snowball Plan - Now that you know how much you owe and have gotten the lowest interest rates you can is time to tackle your debt by following this proven plan.
- Seek Help – if you are overwhelmed or feel you need more help there are many organizations that will help you with
this task and guide you to the solution that best meets your current needs. However, be cautious (see sidebar) when it comes to hiring someone to deal with your debt.
| ”Credit Repair, Debt Settlement, Debt Elimination” Companies
There are a lot of
scams out there claiming to help eliminate/settle/pay off your debt but in the end all they succeed at is parting with your money and leaving you with the debt. Firms exist that will negotiate new payment plans with your lenders by cutting interest rates and fixing a payment plan that will liquidate your debt over a specific number of months. There are other firms that will negotiate reductions in the principal debt you owe, the way they make money, but be careful in this area. The IRS considers debt forgiveness as income in most cases, subject to reporting and the payment of taxes.
On the other hand there are legitimate, helpful resources that can help you get your financial house in order. Here are just a few of them:
- Wealth-Steps.com – look on the left. Lots of helpful information here.
- Your church – many churches offer excellent programs for credit debt relief, financial management and planning. If they don’t they can probably put you in contact with someone who does or someone that can help…just ask.
- Your School – in the last couple of years college students have been overwhelmed by offers of predatory lending in the hopes that if you get into debt early in your life you will stay in debt forever. As a response to this many college campus have instituted financial counseling opportunities.
- Your Company – many corporations offer financial counseling as part of their employee benefits package. Ask your Human Resources office.
- Reputable Organizations - like Consumer Credit Counseling Services and, National Foundation for Credit Counseling are well established and have helped many with credit debt relief. Before using one of these just check with the
Department of Justice and the
Federal Trade Commission, especially if you have to pay for their service.
There is no easy credit debt relief program in the first place. Managing your personal credit usage is an adult responsibility that should not be taken lightly, but if a problem exists, there are credit debt relief options available to suit your individual situation.
Having read this article you are off to a good start, but be sure to leave a comment or question below if you want to find out more.
Thanks to Michael Trinkle from Forextraders.com for his contribution to this article
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