A consumer credit card or a personal credit card is one, which is owned by an individual for his/her personal purchases. It has a limit of credit that you may use every month. With time, as your income and credit score increases, so does the credit limit on your card. However, if this buying power is not utilized in the right way (i.e. if you spend more than what you can pay back once the credit card bill comes), debt trouble is what you have in store for you.
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With a large number of people stuck in the debt trap, “Debt Relief” is the new buzzword. And credit cards being the main source for debts, you can find a large number of companies specializing (or claiming to specialize) in consumer credit card debt relief.
The two most popular programs available in the market, for consumer credit card debt relief, are as follows:
Credit card debt consolidation
As indicated by its name, credit card debt consolidation means consolidating your various credit cards debts into a single unsecured or a secured loan (against collateral). A secured loan is more advisable for consolidation because it comes at lower interest rates but then you would have your collateralized asset at stake.
One way of consolidating credit card debt is to transfer the balance of two or more credit cards into a single low-interest or no-interest credit card. You can validate the benefit of this debt consolidation method by comparing your existing debt and the total amount you pay monthly to the new monthly payments you will be making after the consolidation. Also check the low-interest/zero-interest period on your new credit card – it generally lasts just a few months.
Another way to consolidate credit card debts is to approach a lender for a personal loan and pay off your credit card debts using that loan. This will help because credit card debt often piles up very fast; moreover, it is difficult to keep track of multiple payments. However, if you already have a bad credit score, you will end up with high interest loan, in which case it may not be a good option.
One of the popular options is home equity loan. Here you get a loan against your home equity and you can use this money to pay your other debts. You will then need to make payments only towards your home equity loan.
Credit card debt negotiation
Negotiations with the creditors to get a discount over total balance you owe them and making one full payment (or a combination of lump sum and monthly payments) is called debt negotiation or debt settlement.
You can negotiate your debt with your creditors and reduce the total sum you owe them or get a discount on the total balance. It is possible to reduce about 50% of the amount. You would generally go for debt negotiations when your debt situation is completely out of control and no other measure can help. You can also approach a debt negotiation company as well to get the best reductions possible. Be aware of the history of the company you are approaching.
However, debt negotiation and settlement can have a big negative impact on your credit report. So, debt consolidation is what you should try before really considering the debt negotiation route.
So, get your information together about the various consumer credit card debt relief programs available and choose one today if you don’t want to spend the rest of your lives paying debt and saving peanuts!