The effects of a strong credit card bill can extend to all parts of life, affecting your work, your family life, and even your health. In fact, if you have a large credit card debt, you may feel completely overwhelmed and things may seem helpless. Do not despair, there are many options available to help people free themselves from debt. If you are above your head, read some tips to help you stop drowning and start swimming.
Get the Grip
Out-of-control mall shopper is a caricature of credit card users who are not careful. But you do not need to be reckless to collect huge credit card debt. Perhaps you are leveraging financial resources to advance your education, or your work is suddenly outsourced. Perhaps a long-term illness touches you or your spouse, or you start a business that's never quite caught.
When individuals use credit cards, theyhigh-interestthink it will be a short-term safe path. Unfortunately, life has a way of doing the twists and turns, which is often how credit card debt becomes a long-term trap.
Credit card users, therefore, must remain vigilant and alert to their expenses; Even very small balances can quickly and unexpectedly balloon uncontrollably. In March 2007, the US Senate saw the practice of credit card companies, including lack of disclosure, universal default practices, and interest charged on the entire credit card balance, even when customers make payments on time. In response to a Congressional inquiry, the major credit card companies voluntarily changed some practices. Nevertheless, now more than ever, this is a "borrower beware" when using a credit card.
Get the Lay of the Land
If your credit card and related payment balance have made your financial life unsustainable, you may consider taking the following steps:
- The first step:
Prepare Yourself: Taking control of your financial life involves educating yourself about personal finances and taking hard and honest decisions about the decisions you make to adjust to your current situation. Discipline, focus and personal stamina will be needed for debt relief efforts. There is no quick and painless improvement.
Ask for Help: Hire independent financial advisors, such as Certified Financial Planner (CFP), who can see your particular situation, help you develop a plan and choose a specialist. The type of credit card debt management specialist that is appropriate for your situation will depend on many factors, including the amount owed, the interest rate involved, the assets you own and the particular creditor involved. The use of credit cards can be dangerous but the path to eliminating debt is also fraught with danger. Thus, it's a good idea to ask an independent advisor on your side.
In addition to seeking professional help, you may also consider telling a close friend or family member about your situation to assess all the resources you might get.
If you can replace high interest debt with personal loans, you may be able to get out of debt faster. You may need to swallow your pride to acknowledge your situation, but a much lower interest rate can give you much-needed breathing space.
Some Available Options:
� Debt Consolidation: Debt consolidation involves taking out a loan to combine all your credit card debts and personal loans into one single loan (with one payment). This is generally done to simplify your debt situation and to lower the overall interest rate you pay. Debt consolidation companies generally present themselves as nonprofits but this should not make you believe they work for you. Like all participants in the financial community, they intend to make money from this situation. We recommend that you explore the details of debt consolidation only in relation to the help of an independent financial advisor. There are many risks associated with loan consolidation (such as the decision to switch from unsecured debt to debt secured by collateral). You will want to make sure you enter a situation that makes you less risky, not more.
� Finish Debt: Debt settlement may be an option if you have huge credit card debt and can pinpoint difficult situations in some ways, such as income volatility. In case of debt settlement, you will hire a debt settlement company to negotiate on your behalf with the credit card company you owe. It is not usually recommended to contact your credit card company to try to pay off your own debt because it can make the situation worse. In most cases, a competent debt settlement company can reduce the amount of debt you owe about 25-50%. Debt settlement companies take fees for services, usually a percentage of total outstanding debt. An alternative debt settlement is one to consider if you lose your credit card payment and are in the process of completing a default. Debt settlement appears on your credit report as a collection or settlement and therefore, adversely affects your credit rating for the period of time you collect the approved amount of settlement on the credit card company, plus six months. In practice, this means a black mark on your credit report for three to five years (or even more). It is advisable to first find a personal financial planner to help you check if this option makes sense to you and to help you choose the best debt settlement company for your unique credit card debt.
� Bankruptcy: No one likes to think about bankruptcy but in reality, bankruptcy is a legal financial tool that adults can use to get a fresh start. In some cases, bankruptcy is the only way to get productive financial resources back. A bankruptcy can legally appear on your credit report for up to 10 years but the impact on your overall credit score depends on many factors, including how you rebuild your credit history as soon as your bankruptcy case is closed. Changes made to bankruptcy laws in 2005 make it more difficult for individuals to declare bankruptcy, even though regulations vary by country. If you take this option seriously, see independent financial planners before consulting a bankruptcy lawyer for advice.
Conclusion
Eliminating outstanding credit card debt can be difficult and complex. The first step is to educate yourself, ask for help and seek advice from independent financial planners who can see your unique situation and help you navigate the various options of existing debt assistance. Debt consolidation, debt settlement, and bankruptcy are just some of the possibilities available to you.
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