Credit Card Debt Options

by : Manny Vetti

Making the initial commitment to begin solving your credit card debt can be difficult. It is important that you understand your options before making any commitment to what route you finally decide to follow for solving your credit card debt problem. There are many great options out there that can help each person in their individual situation. Even if you are unsure what solution would be best for you there are many companies out there that will help you find the best option. If you cannot tackle the issue on your own, below are a list of possible options you can use.

Credit Card Debt Consolidation

A credit card debt consolidation entails taking out a new loan to pay off one or more loans. The benefit of doing this is that the new loan is normally a lower interest rate than the other existing loans that it replacing and makes for one convenient monthly payment. This type of loan can take multiple unsecured loans and replace them with a new consolidated unsecured loan or secured loan. Consolidating into a secured loan will give you the lowest interest rate. With a secured loan, the loan is backed by collateral, usually a home. This decreases the risk for the lender and therefore gives you a lower interest rate, however if the loan goes into default the property used as collateral can go into foreclosure.

Cash Out Refinance

A cash out refinance is a great option if you own a home or some asset that appreciates in value. This will allow you to take the equity out of your home and use it to pay off your high interest debt. Using your equity is a good option because the cost for you to borrow equity is much lower than the cost to borrow unsecured credit card debt. When you use a cash out refinance you use the equity in your home to pay off your high interest debts making your mortgage payment larger, however decreasing your total monthly debt payment that you owe. The major draw back of this is that you may end up paying more in the long term because of the extended payment period, however your monthly payments will be lower.

Contact a Credit Counseling Company

Credit counseling companies can be extremely helpful in assisting people in getting out to debt. A credit counseling company can help you with many things based on your situation. They will analyze your current situation and could help you set a budget, work with creditors to reduce interest, late fees and possibly the total amount you owe. Sometimes they will enroll you in a debt management program which is designed around your specific financial situation and can last from 12 months to 5 years. Overall, they can help you stop the collection calls, lower monthly payments, consolidate debt into one easy payment, help you avoid bankruptcy. This can help you save hundreds if not thousands in interest and other payments in the long term.

Where to Start

With the way business is today, your best bet is to start looking on the internet. There are many companies that can be found on the internet. Most companies will give you free quotes or a free consultation with the hope of getting your business. The thing to know is that you have no obligation at all to go with any of these companies if you don't want to. The internet has made increased competition for this business so they know they must be competitive. It is still good to request several free quotes/consultations and compare them. Every company will probably offer you something a bit different. They will normally work with you to find the best solution to fit your individual needs. It may be hard to compare them side by side because they all will come with different terms, but you will be sure to find the best solution that will allow you to start off the New Year on the right track.