Credit Consulting Blog

The Importance of knowing about Credit Card Debt and How to Fix It

We live in uncertain economic times, and it is more evident with the ongoing Covid-19 pandemic that has disrupted lives and businesses worldwide. One common financial tool that most people use is a credit card that helps them manage their financial obligations.

However, you have to timely pay your credit card balance at the end of each month. Failing to do so can make you pay not only the remaining balance but additional costs in the form of interest and penalty. Experts suggest that getting a credit card can help to establish and improve credit history and score. A high or good credit score means you have to pay lower interest rates on mortgages and other loans.

What is Credit Card Debt?

Many people get a credit card but cannot make timely payments, and a huge debt can pile up if an individual fails to make a credit card payment for many months. Making purchases is easy with a credit card, but you get charged the highest interest rates, and it can further accumulate if timely payments are not made.

Credit card debt is defined as a type of liability resulting from unpaid credit card loans. Individuals can accumulate credit card debt by opening more than one credit card account with different credit limits and terms. Most of the debt visible on the individual’s credit report is due to credit card debt, as the accounts are open and revolving.

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How to Fix Credit Card Debt

A person’s credit card accounts can easily be tracked and analyzed by credit bureaus. The lenders who require the debt payment report the balances to credit bureaus every month along with a person’s recent credit activity.

One of the best ways to reduce credit debt and improve credit score is by paying down substantial portions of the outstanding debt.

Credit card debt solutions usually involve a negotiation process known as ‘debt settlement’. A team of professional credit consultants helps to negotiate on your behalf with the lender. The focus is convincing the lender to accept a sum less than the full amount of the debt you may owe. Although it’s a challenging task as the lenders want to pay back a full amount. However, an expert credit consultant can help you to make small payments every month instead of full payment.

There are certified credit counselors who offer services to individuals that include an effective strategy to manage the outstanding debt. Different options are discussed, and the suitable one is selected.

One crucial part of the deal is paying all the accrued amounts, including the debt payments and interest amount. Some of the tried and tested credit score solutions include

  • Debt Consolidation

The common method most debtors take is taking a new loan to pay all the accumulated debt and liabilities. All your outstanding debt is combined into one big amount, but you get favorable terms such as a low interest rate and adequate time to clear the debt.

  • Balance Transfer

You can transfer the outstanding debt from the old credit card to the new one, which gives you the ease of low-cost repayment. You can transfer debt from multiple cards to the new one, and you get credit-free time (more time to clear the remaining debt) without an interest being added to the debt payment.

  • Personal Loan

Taking a personal loan is more of a last resort as you have to pay debt and interest again. However, the interest rate on a loan is considerably less than that on a credit card. If you face financial constraints, you can take a personal loan to pay credit card debt.

  • Refinancing a Loan

If you have bought a house on a mortgage and have been making regular monthly payments, you can ask for a refinancing loan. The lender may evaluate your monthly income, the debt amount, and credit score before refinancing the loan.

  • Snowball Method

One of the common strategies to pay a debt is the ‘snowball method,’ which involves paying all the outstanding debt one by one but gradually. The key is paying the smallest balance first and then managing the bigger payments.

Final Thoughts

Credit card debt is one thing that you may want to avoid at all costs due to its stressful consequences. It can take months and years to repay the debt once the payments are not made for months. However, Credit Consultants of America employs an expert team that can help you fix all your credit card debt. The team knows all the techniques and software that can help you in credit repair and restoration.

 

We can negotiate the best repayment deal with the lenders to allow you to easily manage the revised debt payments. Only with professional help you will be able to pay the debt and save an extra amount that you can use for shopping, mortgage, children, and other expenses.

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