You must be proactive if you want help paying off your credit card bills. While it would be great to receive free money for paying your credit cards, chances are you'll have more success by utilizing options that are readily available. Make a commitment to pay off your debt, and once you choose an option, stick with it until you're debt free.
Lower Interest Rates
One of the easiest ways to automatically reduce your monthly credit card payments is to ask your credit card companies for lower interest rates. Collect those credit card offers you receive in the mail to get a general estimate of the range of interest rates you should aim for, then call your creditor's customer service line to ask for a lower rate. If you've been a customer for a long time, you may mention this in your conversation with the customer service representative for more leverage. If you are denied, call again another day, or ask to speak with a manager.
Consolidation Loans
Consolidation loans wipe out your multiple debts, allowing you to make one monthly payment under a single interest rate. This option is ideal for consumers who have trouble keeping track of their multiple payments. These loans are often advertised at extremely low interest rates to lure consumers into thinking that they will pay far less by using a consolidation loan than by continuing to pay their credit cards. But these ultra-low rates are usually reserved for those with very high credit scores. Before applying for a consolidation loan, find out about how much lower you can get your interest rates. The appearance of a consolidation loan on your credit report may make it difficult to obtain new credit down the road.
Debt Management Plans
People who have defaulted on payments or who are having trouble making payments should make an appointment with a credit counselor, who may suggest using a debt management plan. Unlike debt negotiation or settlement companies, credit counselors help consumers to diagnose and deal with their financial problems from the root. Credit counselors help consumers to create budgets and educate them on how to spend and save wisely. However, if the credit card payments are overwhelming the client, a debt management plan may be a wise course of action. Under a debt management plan, the credit counselor works with the creditor to negotiate lower interest rates and payoff balances. Then, over a set period of time, the consumer makes payments to the credit counseling company, who pays the creditors. Since the credit counseling company acts as the middleman, the Federal Trade Commission recommends checking with the Association of Independent Consumer Credit Counseling Agencies or the National Foundation of Credit Counseling to make sure your credit counseling company is reputable.
Considerations
Debt management plans and debt consolidation loans are both seen as dark marks on your credit report because it demonstrates difficulty in meeting your financial obligations. Consolidation loans have less of an impact because they generally require collateral, such as your house. Debt management plans hold more weight because they usually involve negotiating lower payoff balances, which means that you weren't able to pay the full amount of your agreement. However, both methods are better than defaulting on your loans and are particularly beneficial if you continue to stay out of debt in the future.
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