Once an individual has credit card debts in their kitty getting out of them is never easy. There is , little that one can do since they carry very high interest rates on them and anything left unpaid attracts huge interest payment on them which keeps building with them.
One can find numerous ads regarding benefits of consolidating credit card debt with a personal loan or a home equity loan or a balance transfer offer. One can find unlimited mails regarding consolidation of debts at 0% balance transfers. Even the individual with blemished credit histories and bad credit scores get these types of loan with bad credit.
The individual with $10,000 and more credit balance look for these kinds of attractive offers which reduce some burden off their shoulders.
If an individual is looking for these kinds of offers he/she should try out some other options as well which can help the individual in paying off the debt. Consolidate the credit card debt or other debts after some research so that one does not end up paying even more due to higher interest or longer repayment duration.
Pay Early & Pay Often
The best way to be debt free in case of credit card debts is to pay every month regularly. Also one should pay more than the minimum payment amount due prior to the monthly due date which saves thousands of dollars of an individual on interest over the years.
Credit card companies mostly earn through the interest rates which is 14%, now-a-days, for any new as well as an existing user. This amount provides a lot of profit to these industries and is a source of income.
Let’s take an example, if an individual has $5000 credit card balance with an interest rate 14.48%, and if he pays 3% of amount or $25 per month, it will take 142 months to pay off all the balance and one will pay $3,043 interest charges in addition to $5000 which is principal. So to sum up, one will be paying $8000 for $5000 and till almost 12 years. So it’s better to increase the monthly payment and pay more than the minimum every time.
Regular and timely payment is the best and easy option but the individuals who are already behind payments can not follow this and this is late for them now. However, there is another option of ‘a balance transfer’ which can save money and one should consider before taking out a loan to consolidate credit card debt.
Consolidating Credit Card Debt with Balance Transfers
The credit card balance transfer is effective in tackling the credit card debt. If an individual finds a credit card balance transfer with no transfer fees and initial low interest rate, it will be a useful tool to conquer the credit card debt. Many cards offer a 0 % interest rate during the introductory period and allow one to pay down the balance without incurring a monthly finance charge.
All the old and new, traditional or retail credit card, is rolled up into a new single card with the help of balance transfer.
These credit card companies have a single primary motto- to make a profit. One should always keep in mind that even though the balance transfer is providing the individual 0% introductory interest, they will charge the individual in this or that way. This can be through other fees they are charging or the interest may increase abruptly once the trial period is over. This means increased payable amount which will ultimately put even more burden. Therefore an individual should make sure to plan the minimum payable amount every month in such a way which clears off the entire debt within the interest free duration.
Credit Card Debt Solutions
Due to the recent recession, people find it very difficult to keep up with the monthly installments despite their best efforts. Even making minimum monthly payments becomes so difficult for some. Therefore accumulating interest, late fees, and possibly even over-the-limit fees add up to increase the debt even further. It’s difficult to manage effectively and timely payments for the various debts at the same time.
For the consumers who find these debts unmanageable have various options for balance transfer to debt consolidation to professional help from a debt relief company.
One can solve these exceeding debt problems with the help of some self-help tactics. Following suggestions help one get out of it. One might be benefitted with Step One only but, depending on the severity of the debt, one can even move further to Step two and third.
Step One: Self-Help Tactics to Pay off the Balance
- If a person is not able to manage different debts then he/she should consider the debt with the highest interest rate and should pay off it at the first place.
- Constrain on new purchases and stop the use of credit card. Use cash as much as possible so that one can keep the track of expenses and it will never be out of the budget.
- One should make sure to pay more than the monthly amount he/she is supposed to pay. The sooner one finishes off the debt, the lesser one will be charged on the interest.
- Make the credit card early rather than waiting for the due date or at least do it on a regular basis.
Step Two: Balance Transfers and Personal Loans
- If the first step is not enough for paying off the debt, one should consider this next step-
- Purchase a new low rate credit card and transfer the balances from other cards. But one should keep this in mind that the transfer fees doesn’t outweigh the interest saved, also bear in mind the time limit of the low interest. Once the introductory period is over one will not be able to be benefitted through the offers. Sometimes, companies put a bar on the limit of the transfer amount, keep this in mind.
- To pay off the credit card bills, use the lower interest personal loan.
Step Three: Debt Management Plans and Debt Settlement Plans
If none of the above options help one solve the problem of debt, consider a reputable debt relief company. There are two types, Debt management plan and Debt settlement plan. This option is for a consumer who is struggling with two or more accounts and has a debt of $2500 or more. Two options are:
Cover all the debts of credit cards through the Debt Management Plan (DMP), which consolidates the debts into one affordable monthly payment. The provider negotiates on the behalf of the debtor and distributes the amount to them.
Through Debt Settlement Plan (DSP) one makes a payment which is reduced than the amount loaned. They negotiate with the creditors and settle for the amount which is less than the amount to be paid. This is basically to save one from bankruptcy.
Whatever credit card debt solution one chooses, it’s very essential to check the credentials of any debt relief company, so as not to make a bad situation worse. If one is considering a Debt Management Plan or Debt Settlement Plan, consult a reputable provider who offers multiple credit card debt solutions, not just one type of plant. That way they can assess the situation and help one choose which option is best.
There is no magic wand to clear off the debts over night but surely these are some methods one can utilize and reduce the burden.