Options for Getting Rid of Credit Card Debt

There are many options to get out of credit card debt without compromising your financial position. First, the best step to take is to stop spending. Once you have stopped adding to your debt, you can determine how much you owe and pursue options to eliminate this debt quickly. 

How Credit Card Debt is Structured

The best way to get rid of credit card debt is to pay it off on schedule, or ahead of schedule. To do this, you must understand how the debt is structured. With all credit cards, there are three separate elements to your monthly payment. First, there is the need to repay the lender for the purchases you made on your card. If you spent $300 on clothing, you will owe the lender the $300 back. Next, there is interest on the payments. This starts as a simple interest charge at your credit card's rate; a 10 percent interest rate would result in a $30 charge on the $300 purchase. Finally, there is a charge for interest that has compounded on previous payments. This compounding effect can have a catastrophic impact on your debt.

Paying Off your Card

To pay your bills, you must at least pay your minimum payment monthly, usually charged as the interest rate on the debts. You must also work to reduce your balance. To do this, determine how much you can put toward your credit card payment monthly. Based on this figure, set a schedule for paying off this balance in regular monthly payments toward the principal debt. To meet your schedule, you must accommodate for the fact your debt will continue to compound even as you pay it off. Paying off your card will result in the best possible impact to your credit score with no negative repercussions.

Reducing or Settling a Portion of the Debt

If you believe you cannot reasonably afford to pay off your current debt load, you can contact your lender to ask for a debt reduction. Few lenders will approve this option. In order get an approval, you must show the lender can earn the highest profit by offering you a one-time payment for a reduced balance. For example, if you recently lost your job and will have difficulty making payments, inform your lender of this problem. By offering to pay a portion of your debt up front, you may convince a lender to settle the remaining amount. You may hire a settlement or consolidation company to assist you with this option.

Declaring Bankruptcy

Bankruptcy is a scary word, but it is actually a legal protection that individuals can benefit greatly from. Most credit card debts will not be wholly discharged in bankruptcy. However, for qualified individuals, a judge or trustee may ask a creditor to reduce or eliminate a portion of credit card debt. The court may also set up a revised payment plan that allows you to slowly repay the lender without incurring additional fees in the meantime. For borrowers in extreme situations, bankruptcy is often the best choice.

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