Settle Credit Card Debt

Options to settle credit card debt include credit counseling, taking out a consolidation loan, negotiating a settlement with creditors, and bankruptcy. Homeowners may have another option by taking out a second mortgage and using the money to pay off debts. A mortgage loan will have lower interest compared to high interest charge accounts. A person who is looking for ways to settle credit card debt should think about the pros and cons of each option and then make an informed decision. Some people may be in a situation where they just do not have enough money to pay more than the minimum payment on charge accounts. Living on a budget and paying extra on one account at a time might be an answer. "In thee, O LORD, do I put my trust: let me never be put to confusion" (Psalm 71:1).

Credit counseling is a good way to start when seeking an answer to high interest accounts. A counselor can give an individual some advice on how to track spending and how to gradually pay down or settle credit card debt. Many consumer counseling services are nonprofit and do not charge a lot for their services. Other than advice counseling services can help a person to make sure that her bills get paid on time each month and will even try to negotiate interest rates and stop harassment by collection agencies. The agency usually receives one lump sum payment from the debtor and then distributes that money between creditors. Beware of any agencies that want a large sum of money upfront for their services and have a monthly membership fee on top of that.

A consolidation loan to pay off charge accounts makes sense if the interest is lower on the consolidation loan compared to the interest on the charge accounts. A person who owns a home might want to consider a home equity loan or a line of credit to settle credit card debt. Doing this could put the borrower at risk to lose her home so before actually going through with this deal the risks should be considered very carefully. Having one monthly payment instead of ten does make life a little easier but the debtor needs to be certain that the charge accounts are paid off with the money from the consolidation loan or there will probably be a lot more financial trouble ahead.

Negotiating a settlement with creditors is something that can seem very attractive to those who are anxious to settle credit card debt. Companies that advertise this type of service claim to be able to offer a payoff settlement to creditors that are much less than what the debtor actually owes. They also claim to be able to get the creditors to lower the interest and to stop charging late fees and over the credit line fees. The debtor needs to be cautious on choosing the right company for negotiating with creditors. Making sure they are a legitimate and reputable company is very important. A person should be very concerned about companies that want a large sum of money upfront before they will start negotiations. Before hiring someone to do this for you a person should contact her creditors and find out if they will negotiate the payoff amount and accept payments instead of one lump sum amount. Start negotiations by offering 40% of the amount due and go up to as much as 60% if necessary to get a creditor to accept the offer.

Filing bankruptcy is an option that will help to settle credit card debt. Filing Chapter 7 is possible if the debtor has not filed in at least eight years and if she has taken a consumer credit counseling class and received a certificate for doing so. The downsides to filing bankruptcy are the costs and the detriment to one's credit history. The costs will include attorney's fees and court costs. The bankruptcy will stay on the debtor's financial history for ten years after the discharge date. If the person filing bankruptcy has mostly credit card debt then Chapter 7 is the best way to go but if she has property that she wants to keep then Chapter 13 should be considered instead.

A person with good judgment will want to try anything before she gives up and files bankruptcy. A good place to start is by keeping a budget and having a payment plan to pay off high interest accounts. Living on a budget could help to settle credit card debt as the debtor becomes more aware of spending habits and can apply more money to paying off debts. A budget is easily set up by listing all income, all assets, and all expenses. This can be done by month or by payday. Every penny spent should be written down. Knowing where the money goes makes it much easier to track spending. Spending less will mean more available funds to get debts paid off.

When debts add up to more than one's income then something has got to give. Either the debtor must find a way to make more money or she must find a way to spend less or owe less. Talking to a financial counselor might help a person see where she can reasonably settle credit card debt. Having a professional look over the budget might help in seeing where changes are possible. There is an answer but it may take time and determination to find the answer and begin to see the results.