People with overwhelming credit card debt face a few unpleasant options. They include getting yourself deeper into debt or taking a major hit to your credit rating. If you believe you can eventually pay off the debt, consolidation under the lowest interest rate is the best choice.
Put Away the Credit Card
Stop piling on more loans. Put away the credit card and do not accept loans from friends or relatives. Be especially wary of payday lenders that charge heavy interest rates. The best option is to use debit cards or cash to make payments. If you need a credit card to survive, try to shop around for a lower interest rate card.
Debt Consolidation
Consolidate your credit card debts into a lower interest loan. If you have a mortgage, your interest rate is probably closer to 5 or 6 percent. The mortgage can be used to finance the credit card debt to reduce the 15 to 20 percent interest rate down to manageable levels. Mortgage and financial consultants can work with you to complete this process.
Debt Restructuring
Work with the lender to restructure the payments. It will usually prefer this over your defaulting completely. Work with a counselor from a nonprofit center to determine what you can pay and how long you can pay it. You may even be able to reduce the principle balance, although that will impair your credit rating.
Bankruptcy
If you have exhausted every alternative then Chapter 11 bankruptcy may be the best option remaining. You will be unable to use credit to buy an automobile or home for up to 10 years. In addition, if you receive a credit card it will have a low credit limit. On the other hand, your debts will be wiped clean and you will no longer be enslaved in overwhelming debt and interest payments.
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