A change of personal circumstances can turn manageable into unmanageable debt. Getting out of debt affordably and more quickly is an important goal for any family facing an excessive debt burden. Fortunately, there are a number of credit card debt reduction strategies that can help to balance income and expenditure and clear debt in a fraction of the normal time.
Credit Card Debt Reduction Techniques
A debt free solution, such as a debt management plan or debt settlement program, can help to restore parity to family finances. This is achieved through greater affordability and/or a reduction to the principal (amount owed). It is important to appreciate that a debt relief program will require a monthly repayment which could prove difficult if unemployed. Failing to comply with the original T&C's of a credit agreement will also result in a lower credit score. Never sign an agreement where the charges are front loaded as it could create problems later on.
Clear Debt with a Debt Settlement Program
This debt free solution involves negotiating with creditors to attain a reduction to the principal of as much as 50%. The borrower will then pay off credit card debt over the next 12 to 36 months. It may be possible to extend the term of a debt settlement program, but this will decrease the likelihood of creditor acceptance. It is important to appreciate that the reduction will not take place until the final repayment has been made. The management fee is 15% and this will be taken from each repayment.
Pay Off Debt with a Debt Management Plan
Unlike a debt settlement program, there won't be a reduction to the principal. The objective of this debt free solution is a gradual, affordable credit card debt reduction. In return for a 15% management charge, the intermediary negotiates with creditors to establish mutually acceptable repayment terms. They may also be able to get interest and charges frozen. Under a debt management plan, the client makes a single payment to the intermediary and they will distribute the proceeds to creditors on a pro rata basis.
Pros and Cons of a Debt Free Solution
It is difficult to pay off credit card debt because, unlike a consolidation loan, there isn't a defined term when the debt will come to an end. It is possible to achieve credit card debt reduction at an accelerated rate with a debt settlement program and debt management plan. In order to enter a debt relief program, it will be necessary for the borrower to have defaulted on the agreement as lenders won't be as helpful if they are already receiving their money. Defaulting on a credit agreements makes it more difficult to borrow money or refinance a mortgage in the future.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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