3 Ways to Get Out of Credit Card Debt

There are many ways to get out of credit card debt. If you find yourself under mounds of credit card debt, you do have options. Some options will cause a big hit to your credit score, so it is important to find the best method for you and your situation.

1. Paying Down Debt

You can get out of credit card the old-fashioned way by paying down the balances yourself. As long as your payments are on time, you will have no negative credit impact. Actually, you will have the opposite. Your score should see a boost once your balances are low. A popular way to pay down credit card debt is using the snowball method. To do this, determine how much money you have every month to throw at your debt. You take all of your cards and pay only the minimum except on the card with the lowest balance. With this card, you pay the minimum plus whatever extra amount you have decided you can pay every month. You will quickly pay off the first card and then move on to the second. Now you are paying the minimum on all cards, and on the second card, you are also paying whatever you were previously paying on the first card. The momentum of the snowball method allows you to see results quickly.

2. Debt Settlement

You can settle your debt with your creditors yourself or by using a third party. This will have a negative impact on your score since your accounts will show that you did not pay as agreed. Also, the accounts will be closed, which will drop your score. Using debt settlement will allow you to pay off your debt for less money. Either you will get a reduction in interest rates, causing your payments to be lower, or the creditor will allow you to pay a lower balance. Using a third party may make it easier for you, but it usually is costly. Debt settlement is something you can do yourself by calling each creditor and making negotiations that are satisfactory to you and the lender alike.

3. Bankruptcy

Bankruptcy should be the last resort for anyone in credit card debt. Not only is it a very difficult process, but it will also have lasting negative effects. There are two main types of bankruptcy, chapter 13 and chapter 7. In chapter 13, you continue to make payments to all of your debtors over a five-year period. You pay less than you owe so it makes it affordable to those who are deeply in debt. In chapter 7 bankruptcy, your debts are erased by the liquidation of your assets. Most people who file chapter 7 do not have any assets, so their debts are simply wiped clean. Many people do not qualify for chapter 7 due to income or assets. Filing bankruptcy is a lengthy, invasive procedure and can be very difficult for some. It will remain on your credit report for seven to ten years and will drastically reduce your credit score.

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