There are various ways by which you can solve credit card debt problems on your own; but if you have tried all options and still can’t pay it off, then you need a professional help. Credit card debt relief program is designed to get you out of debts quickly so you don’t waste your money on payments and avoid bankruptcy.
In this blog, we will explain you everything about different options for credit card debt relief.
Defining Credit Card Debt Relief
Credit card debt relief program allows you to get out of debt without using new financing. There are various programs that help you do this and which one you will choose depends on:
- The money owed
- Status of debts
- Income and budget
- Credit score and credit goals
If you have tried to reduce your debt on your own through transferring balances, credit debt consolidation and debt relief loans and none of it worked out then it is time to call in the professionals for credit card debt relief program.
There are two basic programs:
- Debt management programs
- Debt settlement programs
Debt Management Program (DMP)
DMP is a type of assisted credit debt consolidation but in this you don’t have to take new financing. It means you don’t have to take a new credit card or take a loan.
Consumer credit counseling agency will help you to set up a repayment plan according to your budget; so that they can negotiate with creditors to reduce or eliminate interest charges and late fees.
Once they agree you have to make payment to the credit counseling agency each month, which will be distributed to the creditors as agreed.
Unlike other credit debt consolidation, you still owe to your original creditors but the repayment will be in a more efficient and cost-effective ways. With this you can clear your debt faster paying less each month. Also, it doesn’t hurt your credit score and help in improving it.
Debt Settlement Program (DSP)
DSP hurt credit score, but it can relieve you from your debts faster and with less money. With this you can pay a portion to each creditor and they discharge remaining balance.
An account is set with debt settlement company in which you deposit money so that the fund is generated required for settlement. Once you receive the fund, the settlement company negotiates with the creditors for settlement. They make them agree to accept a percentage of what you owe and discharge the remaining balance.
Once they agree, the funds are then transferred from your set account. Creditors will then close the account and discharge the remaining balance.
To free your money these settlement companies advise you to stop making payments. This will damage your credit, so there is no point in continuously making payments and also you will generate the funds you need quickly.
Debt Relief with New Financing
With good credit score you can take new financing to get relief from credit card debt. You can take debt relief loans to pay off your existing debts. It reduces or eliminates the APR.
Credit card balance transfers
It allows you to transfer balances from existing accounts to a new card offering low or no APR. You get 6 to 18 months to pay off the transferred balances interest-free.
It works best if you have excellent credit and less amount of repaying debt. Not paying the balance in time, you will be back on a high interest rate.
Personal debt consolidation loans
These are personal debt relief loans that are taken for consolidating debt. With good credit score, you can qualify for a low-interest rate loan; the fund is used to pay off your credit card balances. You just have to repay the loan. These loans offer much lower rates than credit cards with same credit score; also you will receive the benefit of fixed payments.
These loans usually work up to a certain amount of debt. If you owe $35,000 or less, depending on your budget this is a viable option. You must have a good credit to qualify for the lowest APR. Some lenders can offer other restrictions, like you have to close your credit cards for securing the loan.