If you enjoy being seriously in debt, you’re either a very unusual person or maybe as the British would say, you’ve taken leave of your senses. Most people struggling under a big load of debt want nothing more than to get out from under it. If your goal is to become debt free, there are four credit card debt relief options. Which would be best for you? Only you can make a decision. But here are pluses and minuses.
Borrow the money
One of the most popular ways to achieve credit card debt relief is to borrow the money and pay off the credit card companies. You might be able to do this in the form of a debt consolidation loan or you might be able to borrow from yourself by taking money out of your retirement account. In either case, you will get rid of your credit card debts – practically instantly – and should have a much lower monthly payment than the sum total of the payments you’ve been making on those credit cards. There are two reasons for this. First, you are almost sure to have a much lower interest rate than those credit cards and you will have longer terms – or more time to pay back the money.
There are two disadvantages to borrowing money to pay off credit card debts. The first is that it does nothing to reduce your debts. You just move them from one set of creditors to a new one. And second, a debt consolidation loan is likely to cost you more in interest because of those longer terms as it could take you seven years or longer to pay back the money.
A second popular way to achieve relief from credit card debts is through consumer credit counseling. It’s likely that there is a credit-counseling agency in your area. Many universities, community colleges and credit unions offer this service. What this amounts to is that you’re assigned a counselor who will review your finances and then negotiate with your creditors to get your interest rates reduced and any late payment or over limit fees eliminated. He or she will then help you develop a debt management plan to pay back your creditors. In most cases, they will accept your plan so that you will no longer be required to pay the credit card companies. Instead, you will pay the credit agency once a month and it will distribute funds to the credit card issuers.
The biggest downside to credit counseling is that it will probably take you five years to complete your payment plan. These are five years during which time you won’t be able to take on any new revolving credit and will have to live on a fairly stringent budget. In fact, these are the reasons why many people are never able to complete their debt management plans.
Debt settlement is sometimes called debt negotiation because it requires you to contact you credit card providers and attempt to negotiate settlements of your debts for much less than you owe. To be successful in this, you must be at least six months in arrears in your payments to the credit card companies and must have the cash in hand to pay for any settlements that you negotiate. Plus, you need to be a good negotiator.
File for bankruptcy/strong>
The fourth option for credit card debt relief to file do a Chapter 7 bankruptcy. It’s a way to completely wipe out all credit card debts and probably in six months or less. Once you file for a chapter 7 bankruptcy, credit card companies can longer contact you. A chapter 7 bankruptcy can also get other unsecured debts dismissed such as personal loans and medical debts.
The biggest downside of a bankruptcy is that it will stay in your credit report for either seven or 10 years. And you will find it very difficult to get new credit for the first two or three years after your bankruptcy. In addition, bankruptcies are public records. This means a bankruptcy will stay with you forever. A prospective employer could see that you had had a bankruptcy, which could prevent you from getting that dream job.