Tuesday, February 17, 2009

Dealing With Credit Card Debt

Once you have finally realized the mess you are in then it only remains to do something about it by sourcing some credit card debt relief. With the debts rising, it is not surprising that individuals have started to realize the financial problem they have created by the constant and indiscriminate spending they have carried out. Credit card debt was an inevitable situation as credit cards became the norm in almost every household; the ease with which they can be used had to cause problems at some point.

Of the options available, three in particular come to mind as the best ways to approach the debt consolidation problem. Often, it takes some time to realize the seriousness but credit card debt relief is possible providing certain steps are taken. The card holder must cease using it whilst he or she finds an option or the situation will just get worse and will never be resolved.

The easiest method of debt consolidation is where the person still has a good credit rating and uses another credit card that has a low rate of interest where all the debts can be transferred to one card. A good alternative to this option is a consolidation loan at a low interest rate where the debtor can decide exactly how much they can afford to repay every month after the outstanding debts have been cleared.

Once this amount has been agreed, the person with the debts must ensure the payments are made in full each month until the balance is clear. Debt consolidation does require that the debtor is still able to access credit and that they will have sufficient funds to repay the loan.

Many people find that they have left the situation to long and cannot use normal credit card debt relief means so have to rely on assistance from a debt negotiator. Normally, when these negotiations proceed approximately half the debt will need to be paid and the remainder to be written off by the creditors.

However, if this option fails then the only option left is to file for bankruptcy which will clear all the debts but this should never be viewed upon as the easiest or first option as there are negative aspects to consider. The debts may be clear but they will find it hard to get any form of credit for a long time and will have to rebuild their credit history from scratch although it does enable them to have a fresh start. Once your debts have been cleared, hopefully you will learn to be more responsible and not require debt relief from your credit cards ever again.

Not only are people with high levels of debt miserable but they will also often ignore the problem in the hope it will go away; options do exist to help but certain steps need to taken before you can clear your debts. First off, your debt relief will start the moment you take your situation seriously; otherwise it can never be rectified. It is essential to manage debts carefully and get rid of them as soon as possible.

The first thing to avoid is being disturbed by the situation as this will hinder any positive action on your part. Even if you have taken out a large loan perhaps to pay off previous debts, it is imperative that you continue to pay if you want to clear the outstanding balance.

Until you sit down and create a list of all your monthly expenditure, including everything you pay money out on a regular basis, you will not have a true picture of where all your income is going. It is a fact that when you pay for goods or services using cash instead of your credit card that the spending will automatically reduce.

Often saving money for your debt relief; even small amounts has a beneficial psychological effect that should not be ignored. By reducing the amount of entertainment you have on a regular basis will allow even more money to go into your fund and your debts will disappear faster.

No-one really wants to increase their mortgage repayments but many homeowners see their only option is to refinance their home which can work but just increases the amount you pay in the long term. You must consider your reasons for wanting to refinance and whether it is just to have extra cash available because other options are available.

If none of these options can work, including the mortgage refinance then you may have to consider bankruptcy but take advice from a bankruptcy attorney first. You can use cash to pay for your credit card debts and so reduce the monthly payments and help with your debt relief and although your cash flow will increase, so will the amount owed on the credit card.

Unfortunately once you withdraw from your IRA, you will lose your future tax-deferred returns so do decide where things are going wrong and then consult with your counselor over your debt relief situation before you go any further debt. There are occasions to avoid bankruptcy, individuals use the money that has been accumulating in their individual retirement accounts but it has serious consequences for your future financial security.


Erica Smith February 18, 2009 at 11:00 PM  

I saw your blog. I found it worthy enough to exchange link with each other's finance blogs. If interested, please let me know through my mail.

Erica Smith

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