Credit Card Debt Relief

Many consumers may wonder how they can reduce their credit card debt. Those looking for credit card debt relief that does not require a major financial commitment have a number of options available to them.

Consumers with credit card debt spread over a number of accounts can seek a debt consolidation loan to help manage their finances. A consolidation loan is a new loan that consumers use to pay off all their other credit card debts, and in effect turn several loans into one larger one with a lower interest rate. There are unsecured debt consolidation loans and there are also secured ones, which require some sort of collateral. The former option will often carry a higher interest rate, as the lender bears a higher risk level without collateral. Debt consolidation loans can be helpful for those who qualify because they reduce a consumer’s monthly payments and free up cash flow.

Another credit card debt relief option is to seek the help of a credit counselor. Financial professionals can help individuals prepare a budget that will allow them to live comfortably, while still paying more toward their outstanding debt. Credit counseling programs do not reduce an individual’s debt load, but they do reduce the interest rates on the debt. While this option has no effect on a credit score, it does affect one’s credit profile and makes obtaining new credit very difficult.

Debt settlement is another useful tool for obtaining credit card debt relief. With this process, professional negotiators contact a consumer's credit card lenders and explain their client's financial situation. Many credit card companies are willing to negotiate a settlement when they know that the consumer is in a state of financial hardship. Debt settlement programs can help consumers get out of debt fairly quickly and at a lower monthly payment compared to the alternatives.

However, the debt settlement method does have some drawbacks. First, when lenders allow the total debt to be reduced, they do so on the condition that the remaining balance be paid in a lump sum. This requires that the consumer have a large amount of money available to send to their creditor, which may not be possible. Debt settlement also has a serious impact on a consumer's credit score, which may make it more difficult to secure a loan or another credit card in the future. Typically, clients in settlement programs will experience increased collection calls, and certain lenders can become aggressive with their collection attempts.