The average American household with credit card debt has about $16,641 in outstanding balances. Many people consider this an insurmountable amount of money to pay back, but there are ways to get rid of your debt and get your finances on track again. Even if you feel hopeless about the prospect of paying off all that you owe, there are ways to tackle your debt head-on and take control of your financial future. Creating a plan and discussing your options with a financial advisor or trusted friend can help you feel more confident that you’re moving in the right direction.
Know your options
If you have a lot of debt, you may be struggling to find a way to pay off your creditors. If you’ve tried to make payments but find yourself falling behind, you may be considering bankruptcy. While this may seem like an extreme solution to your debt problems, it’s important to know all your options before deciding on a course of action. Here’s a quick overview of some of the different ways you can tackle debt. - Negotiate with your creditors - Some creditors will be open to negotiation and might be willing to reduce the amount that you owe if you are sincerely struggling to make payments. However, this will not work with all of your creditors and it is important to be upfront with your situation. Don’t lie, but do be honest and upfront with them about your situation and see if they’re willing to work with you. - Debt consolidation - Debt consolidation is when you take all of your debts and combine them into one larger debt. This may seem counterproductive since you’re increasing one debt in order to pay off many others, but it can help reduce your monthly payments. If you are able to consolidate your debts and reduce your monthly payments, this can help you get back on track to repay the debt. - Consolidation and balance transfer - If you’re struggling to make payments on a credit card, you may want to consider transferring that balance to a lower interest card. This will help reduce the amount of money that you’re paying each month. Many credit card companies will allow you to consolidate or transfer your balance to reduce your monthly payments, providing you with some leeway as you pay back your debt.
Debt consolidation loans: Be careful!
One type of debt consolidation is an actual loan that you take out to pay off your debts. Although this may sound like a good solution, it’s important to be careful and research your options before taking out a loan. Here are a few things to look out for when considering taking out a debt consolidation loan: - Interest rate - Make sure you understand the interest rate for the loan and how this will affect your debt payments. If the interest rate is high, you might not be making any progress on paying off your debt. - Repayment terms - Make sure you understand your repayment terms and how long it will take you to pay off your debt.