Debt reduction is the fastest way to become free of the dreaded credit treadmill
If you are in over your head with credit card debt, don’t throw the towel in and lose hope because there is still a way out. But in order for you to do away with your credit card debt once and for all you have to be in it for the long stretch. No overnight debt management plans can totally free you from the stresses of credit card debt. Some quick fix attempts at credit card debt reduction are oriented as damage-control measures which try to get around the problem without eliminating the debts.
They can also become every increasingly hard to do every time you try to quick fix a bad situation with another problem. Of all the methods for getting rid of debt, debt reduction is the most successful at saving money and helping debtors become debt free.
Of course, if you are much too deep in debt and bankruptcy is right around the corner, the last ditch effort to pay back your debts is through a proactive form of debt reduction called credit card debt settlement. With this technique, a debt settlement company attempts at a compromise with your creditors to settle your debt at an amount less than you owe.
For the duration of the program, you are obliged to set aside money for a one time payment to settle out the account. If the negotiation is approved, you will receive a letter in the mail from the creditor that the debt has been settled out. The collector will also at the same time notify the credit bureaus that the same debts you paid have been sufficiently fulfilled. Settlement is particularly appealing for collectors during times of very hard financial predicaments for the person in debt, when he is near brink of filing bankruptcy; in which case the debt collector is faced with the possibility of losing more money by getting only a trifle portion of the original debt amount owed.
Credit card debt settlements are only applicable to debts that are unsecured such as those concerning credit cards and medical debts. Also, remember that this is an last resort alternative to bankruptcy. So you should ready yourself for the respective consequences. Like a decreased FICO credit rating, an increase in collection activity the possibility of lawsuits, tax obligations, and that all-too-familiar necessity of coming to a terms with your collectors.
If your situation is not as mired as the one described above, then you can get out of debt rather easily. All you need is confidence, patience, and a willingness to give a shot to the most recent of debt reduction plans: debt-snowballing or debt repayment. This practical way of relieving debt is especially geared towards revolving credit plans such as those involved in credit cards.
In order to get your debt out of your way, first make a accurate list of all your bills in ascending order from the account with the smallest balance to the largest (notice that the order is not based on interest rate, but on the amount owed). If some bills come close in the balance owed, move the one with the higher interest at a higher spot on the list. Then obligate yourself to pay the monthly minimum payment on all debts.
If extra cash is remaining, add this to the dues on the smallest debt, and keep your focus on finishing your dues on the smallest bill until it iscompletely paid off. As soon as the smallest bill is removed from the list, repeat the same process for the next ranked spot, except this time around adding the previous minimum payment for the cleared debt onto the funds allocated for the next.
Keep up this process and you will be shocked at the pace at which you can free yourself from debt.
Steve Martin is a credit card debt analyst with the US Consumer Advocate, which practices in credit card debt reduction.
- Steve Bis