Published On: Tue, Mar 3rd, 2020

How To Get Out Of Your Credit Debt Effectively

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Even before the official announcement that we have a “downturn” in our economy and later, that we are facing the greatest financial challenge since the great depression, people have been feeling the pinch. Cost of living was going up, gas prices broke records and the salaries remained frozen or even went down.

How To Get Out Of Your Credit Debt Effectively

People have turned to their credit cards to make ends meet. The APR was low and going down, banks were offering new cards with big incentives; 6 months with no interest, no annual fees, no verification of income. The feeling was that this trend is going to continue forever and money will keep flowing in one way or another.

The banks started feeling the economic downturn when their borrowers began defaulting on their loans. This recession started at the bottom, with the common man and banks were perpetuating the effect by having all the sell-throughs and default insurances they were selling to each other for a commission. Each credit card default touched more than one financial institution. They covered it up as long as they could, but it became overwhelming.

It was an earthquake of the financial system. Panic set on Wall Street and in the Treasury Department. A complete financial melt-down was predicted. To save us from that doom and gloom, 700 billion in TARP money was allocated to help the financial institutions weather the storm and keep going. It was given with a promise that the banks will continue their loan practices and help the common people and the economy get out of the slump.

That did not happen. Banks took the TARP money, adjusted their balance sheets and took a hard look at their books. In order to stop the bleeding they clamped down.

Suddenly the credit card APR was going up, way up, without being in default. Credit limits were cut down leaving small and big businesses without the ability to continue functioning. Those businesses couldn’t survive anymore and laid off workers who needed to use their credit cards more just to get by.

Even Congress, that is usually the last one to react, jumped into action to protect the consumer and passed a law that will enable banks to hold all the cards in the agreement between them and their clients. Laws take time to enact, so until that law goes into effect next year, the banks have a window to do whatever they please. Within a year’s time credit card APR went from low single digits to high double digits and more.

Regular, hard working people are facing unemployment and consolidate credit debt that they have never seen in their lives. If they are late with a payment, they get even increased APR’s and late fees. The debts are mounting and there seem to be no way you could be able to repay all that you owe.

There are some ways to get out of credit card debt effectively. There are also, unfortunately, many con-artists who take advantage of the situation and kick a lying man in the gut. Many stories are told about promises not kept, money paid up front and no action taken. Not only the clients found themselves with no debt reduction, they were short a few thousand dollars they paid the “broker” to reduce their loans. You should be careful and know what is out there.

Debt Consolidation Loans

Those are secured by Real Estate. If you do not own a house, or there is no equity left, this is not an option for you. If you do, you can consolidate higher interest rate credit cards into a much lower interest loan secured by your house. The down side of this plan is that if you default on your payments, your house is in a risk of foreclosure. Statistics show that people who use debt consolidation loans are again in credit card debt within a year.

Credit Counseling

This is a form of debt consolidation without taking out a new loan. It is limited to those who are not more than 3-4 months behind on their payments. Your credit card debt is consolidated through a credit counseling service. The APR is reduced and fees are eliminated. Debt consolidation can have you debt free in about 5 years, with little negative impact on your credit score. Besides cutting down what you owe, the biggest advantage is that you make one monthly payment to the counseling agency and they take care of distributing it to your lenders.

Debt Settlements

A debt settlement company can negotiate with the financial institution about reducing your balance. Some credit card companies agree to a reduced lump sum. Others will negotiate a payment plan for the reduced balance that you will have to make to an account. Once there’s enough money in this account, the credit card will be paid off. This is a good alternative to bankruptcy. You have to be aware of the fact that negotiating with the banks will negatively affect your credit score. This will be done until the whole balance is paid off.

Talk to The Bank

Banks are more liniment these days to their defaulting clients. They offer deals personally to their clients. Citibank offers to freeze the account, stop the late fees and create a reduced payment plan. Getting back some of their money is better than none.

Having a big consolidate credit debt is a scary and unpleasant situation. You can feel overwhelmed when you open your credit card bill and find that it grows instead of becoming smaller with all the payments you’ve already made. Getting credit card help is a big step in your way to financial stability. Sometimes all it takes is being pointed in the right direction.

Credit card debt doesn’t have to be crippling. It does take its toll on families, and businesses, but it isn’t a deep hole you can’t climb out of. With persistence, sacrifice, excellent financial advice, and a willingness to follow that advice you can get out of the credit debt hole and back on solid financial ground.

About the Author

- I am an internet marketing expert with an experience of 8 years.My hobbies are SEO,Content services and reading ebooks.I am founder of SRJ News andTech Preview.

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