If you need to get out of debt fast, you'll need to find the best way to pay off credit card debt
What could be more American than drowning in credit card debt? At some point, though, you have to wake up from the great American dream and face the consequences in the cold light of day.
If you're looking for the best way to pay off credit card debt, you're not alone. Over 38 percent of American households are carrying credit card debt, and the average credit card debt owed by these households is $16,000.
The way to break free from this trap is to take action. These are some of the options that you can consider to join the nearly 62 percent of the population without credit card debt.
Taking the scissors to your card
As long as you keep adding to your credit card debt, you'll continue to fall behind. The first step is to avoid using your credit cards as much as possible.
Switching to better interest rates
Competition among credit card companies means you can find other credit cards with better rates. If you have credit card debt with a high interest rate, consider paying it off with a card that has a better interest rate, allowing more of your payments to go toward paying down the principal.
Negotiating with your creditors
Debt collection is a messy business, and creditors are often willing to negotiate to keep you making payments. You can sometimes save money by taking the time to reach out to them and make payment arrangements.
Altering your lifestyle
As the old saying goes, everyone wants change, but nobody wants to change. Depending upon the amount of credit card debt you've accumulated, you may be able to make enough of a difference by trimming your monthly expenses.
Odds are you can find a lot of things that you don’t really need. Some ideas for places to cut include:
- Dumping your cable bill
- Replacing your cell phone with a track phone
- Selling your car and carpooling or using public transportation
- Selling valuable possessions you aren’t using
- Dropping other non-necessary expenses like lawn and laundry services, or club memberships
- Preparing meals at home instead of going to restaurants
When you look closer, you will be surprised at the amount of money you spend unnecessarily.
When you know how much money you have to devote to your credit card debt, you can use a debt payoff planner to determine the best way to eliminate them fast.
If your credit card debt is too high you may find that cutting expenses is not enough, and you'll need to consider more drastic solutions.
Refinancing your home
If you've built equity in your home, you have the option to refinance your mortgage and roll the credit card debt into the new loan. Although you're increasing the amount you owe on your home, this solution has the advantage of consolidating your payments and spreading them out over a longer period, and most home loans will have better terms than a credit card.
Consider debt consolidation
Another option is to take out a loan to pay off your credit cards. Your new loan should have lower payments, a better interest rate and a longer repayment time, making it possible for you to make headway.
If you can’t get a loan from a bank or credit union to help with your credit card debt, a debt consolidation service is one way to get it paid off faster. You take a short-term credit rating hit, but that should improve as you pay your debt down and right yourself financially. According to Robert Thomas, a finance Expert on JustAnswer:
"A debt consolidation company will lower your credit score. They also can freeze your credit for the time frame of the consolidation BUT, with today’s loan guidelines being tightened greatly, having the debt paid off before buying a home is very important. If you are planning on not buying a home until the consolidation is final your score will be higher then than now.”
There are many predatory companies that claim to help you with your debt, but do nothing of value. If you choose to go this route, you'll want to know how to find a reputable company that will actually resolve your debt problems.
When researching a debt consolidation service,
- Search online for ratings and feedback on the company
- Check with the Better Business Bureau to see if the company is accredited and how they are rated.
- See if the company is registered with any industry agencies such as the NFCC or the FCAA.
- If you're looking for a non-profit company, ask to see their non-profit documentation.
- Avoid agencies that claim to serve a specific social or religious group.
Unfortunately, there are far too many companies that exist only to exploit the desperation of people in difficult financial situations. Taking the time to do your homework will help you avoid being taken advantage of.
When all else fails, you have the nuclear option. Since the average American credit card debt is over $16,000 per household, many people find themselves unable to make their payments. If you find yourself in this situation, you may need to consider declaring bankruptcy. This will destroy your credit, and you'll need to work hard to rebuild it, and you may lose properties and possessions in the process, but it will eliminate most of your debts.
There are different forms of bankruptcy, with different methods of resolution. You'll need to work with a lawyer to find out the best way to file, based on your situation. If you own property, for example, this might change your decision. As Terry L., a legal Expert on JustAnswer explains,
“Since you have equity in the one rental, you would lose that in a chapter 7 bankruptcy case. Therefore, you may want to consider chapter 13 debt consolidation, where you would pay back enough of the debt to protect your assets. If a creditor gets a judgment, yes, they can put a lien on any assets you own, including the rental property.”
If you find yourself out of your depth trying to deal with credit card debt, a financial planner can help you determine your best course of action. The qualified Experts on JustAnswer are an affordable source for financial advice on topics like finding the best way to pay off credit card debt.
Do you have any tips on how to control credit card debt? Share them in the comments below!