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How to Get Deal with Credit Card Debt

Learn 5 different ways you can either tackle credit card debt on your own or get expert help.

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Feeling Overwhelmed by Credit Card Debt?

credit-card-dominos-400px.jpgHas your credit card debt grown to the point where it doesn’t feel like the minimum payments actually pay anything down anymore? Does it feel like you're just treading water, not getting anywhere? Maybe you've been using your credit cards as a financial lifeline, your cards are maxed out, and you want to know how to either consolidate, get more credit, get interest or debt relief - or something that will be able to help you. Here we'll provide you with an overview of options and solutions that can help you. With the right help and advice you should be able to put together a plan to get your finances back on track and get out of debt in a reasonable time period.

6 Ways to Deal with Too Much Credit Card Debt

Here are six ways you can deal with your credit card debt either on your own or by taking using a debt relief program. The first two options are approaches that can help you pay off your credit cards as quickly as possible on your own. The next two require you to work out a better arrangement with your creditors, and the last two are debt relief programs where other people deal with your creditors for you.

 

Use the snowball method to encourage and motivate yourself to keep paying down your debt

Snowball Method

Pay the minimums on all your debts but pay as much as you can on your smallest debt

With the snowball credit card paydown strategy, after you make minimum payments on all of your debts, your debt with the smallest balance is the one you single out to pay all the extra money on that you can find. Once it’s paid off, you take the money you were paying towards it and put that money towards your debt with the next smallest balance. As you work your way from smallest balance to largest balance you gain momentum - like a snowball that gets bigger and bigger, your payments get bigger and bigger.

The advantage of the snowball method is that you quickly see the benefit of your hard work. Paying that first debt off feels good, and the success motivates you to keep going.

The avalanche method is mathematically the fastest way to pay down your debt

Avalanche Method

Pay the minimums on all your debts but pay as much as you can on your highest interest debt

The avalanche method works much the same way as the snowball method does, but the debt you choose to focus extra payments on is the one with the highest interest rate (even if it has the lowest balance owing). By paying off your highest interest debt first, followed by the next highest one, the third highest, and so forth, the money you save on interest is put towards paying off your debts.

With credit card interest rates coming in on average between 19% and 30%, you will pay less interest overall by using the avalanche over the snowball method. However, many people find they're more motivated by the snowball method since it feels like they're making faster progress and actually getting things paid off. Choose the method that you think would work best for you.

Consolidating all your debts sounds like a great idea, but doesn't always work that well for most people

Consolidate

Combine all debts into one payment

You can approach your bank or credit union and see if they can help you put together a consolidation loan. If you have equity in your home, taking out a second mortgage might be a good option too. There are two things to watch out for with this option:

  1. If you are going to be charged a high interest rate on your loan, it may not be worth it. Speak with one of our Credit Counsellors to see what other options you might have.
  2. For more than 70% of people who get debt consolidation loans, the loan doesn't end up getting them ahead. The reason is that they didn't follow a spending plan to ensure they didn't re-accumulate the debt.

Before going down this path, feel free to talk to one of our experienced Credit Counsellors. They'll go over all you options with you and help you put together a realistic budget and a plan to get out of debt.

You can try negotiating lower credit card interest rates with your creditors

Negotiate Interest Relief Yourself

Call up your credit card companies and ask them to reduce your interest rates

Negotiating credit card debt relief means asking your credit card companies to lower the interest rates they are charging you. With a lower interest rate, if you are carrying a balance, you end up paying less interest. This means that with every payment you make, more of your balance gets paid off rather than being gobbled up by interest charges.

The best time to negotiate the interest rates on your credit cards is when you have low balances and you’re still up to date with your payments (if you have high balances or are behind on your payments, the next option on this list may be your better option). If you want to know the best way to call up your credit card company and ask them to lower your rate, Squawkfox.com has some great step by step instructions. They even give you a script to use when talking to your credit card company. Try it! You’ve got nothing to lose.

You can look into getting professionals to negotiate for you

An Agency Negotiates for You

Interest elimination along with consolidating to one payment

This avenue can actually encompass three seperate options:

  1. A Debt Management Program (DMP)
  2. Orderly Payment of Debts (only available in Alberta)
  3. Debt Settlement

A Debt Management Program consolidates all your credit card payments into one monthly payment that fits your budget. Interest rates are eliminated or substancially reduced. This option is private: only you and your creditors know about it.

Orderly Payment of Debts also consolidates all credit card payments into on payment, and all interest rates are reduced to 5%. However, since this option involves a legal process, there is a permanent public record.

A Debt Settlement typically only works if you haven't made payments on your debts for a while and have a lump sum of cash to offer to settle your debts for less than their full value.

To find out if any options like these might work for you, make an appointment to speak with one of our Credit Counsellors. They'd be happy to look at your situation with you and see what your options look like.

Filing for insolvency can significantly reduce your debt if you're okay with the public record

Insolvency

Repaying Less Than You Owe Through a Bankruptcy Trustee

Two legal methods of dealing with credit card debt are available in Canada through a Bankruptcy Trustee: a Consumer Proposal and bankruptcy.

A Consumer Proposal allows you to repay less than you owe over a number of years. Depending on the type of debts you have and your overall circumstances, it could be a viable option for you. However, since it's a legal process, it can have long-term ramifications.  Speak with one of our qualified Credit Counsellors to determine if this option may be appropriate for you.

Bankruptcy of course can allow you to walk away from your unsecured debts if they've become to much for you. Again it's wise to speak with a Credit Counsellor to make sure you don't have any other options before heading down this path. Bankruptcy can work well for some, but for others it can be more expensive or detrimental than other options.

How to Get Free Expert Guidance

credit-counselling-couple-options.jpgAs you can see in Canada, there are many ways you can tackle credit card debt. Some options can work quickly and be very effective, while others can take more time and require more financial discipline. Choosing the option that’s best for you is something you should do carefully. One way you can make the process much easier for yourself is by speaking with one of our accredited Credit Counsellors. They can help you put together a budget, see what you can realistically afford to pay towards your debts after allocating a reasonable amount to your living expenses, and then help you look at your options to eliminate your credit card debt as quickly as possible while positioning you to achieve your long-term financial goals. There help is always free, non-judgmental, and completely confidential. You can speak with a Counsellor by phone or in person - whichever is best for you. Give us a call and make an appointment to speak with one of our Credit Counsellors at 1-855-232-4888. You've got nothing to lose but your debt.

 

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