Is There Real Help With Credit Card Debt?

Many consumers find themselves deep in credit card debt. With most credit cards charging high interest rates, a large portion of most monthly payments goes to interest, making it difficult to pay down the debt. However, there are a number of ways that consumers can find help to reduce their credit card debt and get their finances back under control.

Credit Counseling

Credit counseling is a service that may help a consumer in credit card debt in many ways. Credit counselors can negotiate with lenders to reduce the amount of the monthly payment as well as the interest rate on the credit card. Both of these can help the consumers to better manage their debt. In addition to negotiating with the credit card issuer, credit counselors also offer a number of educational services to consumers on topics including developing budgets and avoiding other debt.

Refinancing the Debt

Another option for paying off credit card debt is to use equity in a home. Consumers may use a home equity loan, a cash-out refinance or a second mortgage to tap the equity in a home to pay off the credit card debt. Though the loan against the home will remain, the interest rates on these loans are typically much lower than credit card interest rates. By paying a lower interest rate, consumers will be able to pay off the debt much more quickly. Consumers who may have trouble paying the loan should use caution using a home equity loan or similar method to pay off the credit card debt as the loan will create a secured loan, which exposes the consumer's home to risk.

Debt Settlement

Debt settlement is another process that a consumer can use to pay off credit card debt. In debt settlement, the credit card issuer agrees to accept a lump sum payment of less than the amount owed on the card to settle the account in full. Typically lenders will only accept a settlement offer from consumers who are behind on their credit card payments. Consumers can negotiate a debt settlement themselves or choose a company that will negotiate the settlement. When choosing a debt settlement company, consumers should research the company with the Better Business Bureau and their state's attorney general for complaints.

Bankruptcy

Bankruptcy should be the last option used by consumers to deal with credit card debt. Although debt settlement will damage a consumer's credit, the effect of bankruptcy on a credit score will be worse. In bankruptcy, a court will look at a consumer's financial situation and determine the proper course of action to take, which may include the discharge of credit card debt. Courts may allow consumers to make reduced payments on debts, and many consumers are able to keep their homes during a bankruptcy.