Credit card debt can be eliminated for all but the most dire situations. I can make this claim based on the knowledge that credit card companies will simply stop issuing credit to those whose finances are beginning to spin out of control. They will discover this by observing the creditor’s falling credit rating. Of course, high debt coupled with job loss or unexpectedly large medical expenses can change a manageable situation to one that is out of control. Then, bankruptcy may be the only way out. But for the vast majority of creditors, this is not the case.
For most cases, the best method for eliminating credit card debt is the old fashion way - roll up your sleeves, trim your expenses, and get started paying down those credit card debts. Then, dig in you heels when the temptation to go over your budget comes up (which will happen something like 27 times a week!). But, by relentlessly making this commitment, the amount you can pay down your debt each month will grow ever larger. Your payments get larger since your balance is gradually reduced which results in lower interest charges each month. This means that what would have gone to the greedy banks can now be applied to pay down your debt.
One way to put yourself in further financial danger, however, is to put up your home or other essential property as collateral for a secured loan. Once you take out a home equity loan, you may get a more favorable interest rate – nothing wrong with that. But, it also puts your house at risk. Meaning…if you were to suddenly loose your job and cannot make those mortgage payments for an extended period, it is the financial institution’s right to seize the collateral on that loan. In this case the collateral is your home.
Unsecured as well as secured debt consolidation loans are generally available from lending institutions. These are intended to help you manage your credit card payments by combining all credit card debt into a single payment. Unsecured consolidation loans are generally available for those that are not too far in debt. To qualify for the unsecured loan, the borrower’s financial situation would have to suggest that the lender is not at high risk. So, if you are carrying a particularly high level of debt relative to your income, you will probably not qualify. In this case, you would have to look at a secured debt consolidation loan. In this case, you will put up something – such as your home – as collateral for the loan. Unfortunately, similar to the home equity loan, your will risk loosing your home if you cannot continue to make the loan payments.
Although the unsecured consolidation loan seems to be the way to go, if you have a very negative credit standing, your chances at obtaining such as loan are practically non-existent. Also, given the financial situation that is global in nature, do not expect any reputable lender to make such a loan.
One other situation to avoid…the “payday” loan. These are loans that allow you to access cash by putting up you next paycheck. Chances are you will not be able to pay back this loan on time. That’s when the added paid starts. These loans come with all sorts of interest rate clauses. Before you know it, you are paying back unbelievable amounts in interest. These make the greedy bank’s 29% credit card interest rates look attractive. Don’t use payday loans. Ever.
Hopefully, this has opened your eyes to a few pitfalls to avoid when getting your credit card debt under control. There is no magic. But if you are committed and diligent, you can eliminate that debt. See our other articles on this website to get ideas on how to eliminate credit card debt the right way.