Credit Card Debt Relief

Get help with your credit card debt with free credit counseling, debt management and a consolidated monthly payment at lower interest rates.

Credit Card Debt Relief Options

Credit Counseling

Certified credit counselors provide free budget and credit counseling that can help you get a handle on your debt. Credit counseling is confidential and will not impact your credit score.

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Debt Management

A Debt Management Program can help you qualify for lower interest rates and a consolidated monthly payment, so that you can pay off your debt in three to five years.

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Debt Consolidation

Debt consolidation provides debt relief by consolidating your loans into one. A good debt consolidation loan will have a lower interest rate than the average of your debts, saving you money so you can pay them down faster.

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Consolidate Credit Card Debt Tips to Success

This video illustrates 3 tips to help get you out of credit card debt, and manage your personal finances. We have listened to the needs of our clients and have addressed their money concerns in this video.

How To Get Out Of Credit Card Debt

Credit card debt relief options can be a confusing subject, especially when you’re heavily into it, which most Americans are. In the United States, total consumer credit – debt incurred for purchasing goods or services – is $3.1 trillion. Nearly forty percent of America’s 120 million households carry a balance on credit cards. The average balance for each home that carries credit card debt is $7,200. Credit card consolidation companies offer solutions, but you should be educated on your options before choosing one.

Forget bosses, teenagers and the IRS. The biggest cause of headaches in America is the credit card.

There are no government studies to directly prove that. But there are numbers like $15,762 and $2,630. The first one is how much credit card debt the average U.S. household carries. The second is how much that household pays in credit card interest every year.

That’s a far bigger headache than having to take your 13-year-old daughter to a Justin Bieber concert, much less paying $1,400 (seriously) for tickets near the stage.

So what’s the cure? We’ll get to that, though the truth might hurt.

In the meantime, there are a variety of headache treatments out there. All it takes to find them is a little research, though even that can be a headache so we’ve done it for you.

Here are the major ways to pay off debt. We’ll take them from the most benign to the most drastic.

Budgeting and Paying Debt on Your Own

You track your expenses, set financial goals and tailor your lifestyle to meet them. Use a credit card payoff calculator to figure out how quickly you can pay off your debt.

Pros:

  • It’s free. There’s no need to hire a third party to set up a budget or negotiate with credit card companies for better terms.
  • You are the master of your own financial destiny.

Cons:

Time to repay: That’s up to you.


Balance Transfer

You move your debt to a new credit card offering a lower interest rate, sometimes as low as 0% for up to 18 months.

Pros:

  • No interest should mean a lower monthly bill.
  • You can consolidate your various credit card bills into one payment.

Cons:

  • You’re exposing yourself to being even deeper in debt. You must read and adhere to the fine print. That low introductory rate always has an expiration date. If you don’t pay off your debt in time, you might end up paying a higher interest rate than you had with the card you abandoned.

Time to repay: It depends on your terms. Say you have $5,000 of debt and make monthly $400 payments. With a 20% APR it would take 15 months and you’d pay a total of $6,000. A 15% APR would take 14 months and you’d pay a total of $5,600. A zero-percent interest means 13 months, or a month longer than most 0% balance transfer cards allow.


Credit Card Debt Consolidation Companies

Credit card debt consolidation companies can help you by paying off all of your credit card debt and leaving you with a single loan to pay off. The key is getting beneficial credit consolidation loan terms (i.e. low-interest rate) that save you money.

Pros:

  • Simplicity. Instead of dealing with bills from each credit card, you have one monthly payment.
  • Your financial burden is eased.

Cons:

  • If you use your house or other assets to secure the loan, you could lose them if you default on payments.
  • If the interest rate isn’t low enough and/or the pay-off time is excessive, you might end up with more debt than when you started.

Time to repay: It varies, but most debt-consolidation loans are for 36-to-60 months.


Home Equity Loan/Line of Credit

It’s essentially a second mortgage. You use your house as collateral to get a loan that is paid over a fixed term. Or with Home Equity Line of Credit (HELOC), a lender opens an account you can draw from as the needs arise.

Pros:

  • Interest rates are generally far lower than those offered by credit cards.
  • You can consolidate all your debts and have one monthly payment.
  • A HELOC offers the flexibility of borrowing smaller amounts depending on your circumstances.

Cons:

  • Your house is used to secure the debt, so it could be foreclosed if you fail to make payments.
  • Closing costs, such as attorney fees, appraisal fees, title search and points.
  • If you get an adjustable interest rate and the market doesn’t cooperate, you could end up with a credit-card type interest rate.
  • You’ll need a favorable debt-to-income ratio to qualify.

Time to repay: HELOC draw periods are usually 5-10 years and repayment periods are 10-20 years. Home equity loans can be taken out for up to 30 years.


Debt Management Program

You hire a non-profit credit counseling agency to negotiate better terms with the credit card agencies. A counselor reviews your financial situation and tailors a budget. You make one monthly payment to the company, which distributes those funds to the creditors.

Pros:

  • Lower interest rates and simplified financial obligations.
  • You get a clear picture of those obligations, and counseling typically includes a course on budgeting that could enlighten you.

Cons:

  • If you miss a payment, creditors will remove you from the DMP list and might restore previous terms.

Time to repay: Most DMPs are for 36-to-60 months.


Debt Settlement

The most radical remedy, recommended only if your credit card headache is migraine caliber and all but incurable.

You stop paying your credit card bills and a company tries to negotiate a reduced settlement with creditors on your behalf. You pay the company that amount, either in a lump sum or monthly payments. It distributes that money to your creditors.

Pros:

  • Your debt can be drastically reduced, sometimes more than 50%.
  • You make one payment a month instead of many.

Cons:

  • It destroys your credit score when you stop paying your bills. Accounts usually need to be three to four months delinquent before creditors will negotiate a reduced payment. In the meantime, late fees and credit score damage piles up. Debt settlement stays on your credit score for seven years.
  • There is no guarantee creditors will agree to a reduced payment. If they refuse you will be in worse financial shape than you started.
  • You must pay taxes on the debt that is forgiven.
  • The industry has a shady reputation since companies make money by taking a hefty percentage of the debt that’s negotiated.
  • Most people don’t understand that debt settlement will not help you pay off your debt faster. It can take years of monthly payments to the law firm to build a fund large enough for the attorney to negotiate with.

Time to repay: Typically two to four years.


Credit Counseling

This is the often the easiest and most effective treatment. A professional studies your financial situation and advises you how to escape credit card debt.

Pros:

  • They do the work for you.
  • There is usually no fee to discuss your situation with a counselor.

Cons:

  • None, as long as you use a reputable credit counseling agency. Check out the National Foundation for Credit Counseling for recommendation at https://www.nfcc.org/about-us/.

Time to repay: It depends on which program (DMP, HELOC, etc.) you choose, assuming the counselor advises one of those treatments.

Key word: Treatment.

All these programs are really just ways to deal with symptoms. Because the true cause of credit card headaches isn’t credit cards. It’s the person using them. In fact, average credit card debt varies by state, level of education and income, among other factors.

If you take one of the aspirins we’ve discussed, your condition will only return if you keep spending beyond your means. So pick a treatment that best suits you.

Just remember, only you can cure yourself from credit card pain. If you do, imagine how much easier it will be to deal with life’s other headaches.

Wonder if there’s a cure for Justin Bieber?

Financial Help for Widows

If you have recently lost a spouse and their income, you may be in need of fast financial relief. Financial help for widows comes in many forms including, including hardship programs that may be available from your creditors and mortgage company. Additionally, you can find out if you qualify for social security benefits from your deceased spouse.

Financial Help for Senior Citizens

Nearly a quarter of America’s senior citizens don’t have retirement or personal savings. At the same time, they are suffering from record debt levels including credit card debt, student loan debt and housing debt. The good news is that there are numerous resources that offer financial help for senior citizens, especially related to credit card debt, finding employment, food assistance, legal and housing help. Learn more about financial help for senior citizens.

Get Food Budget Relief with SNAP (food stamps)

Depending on your income and assets, you may qualify for the Supplemental Nutrition Assistance Program, or Food Stamps. Reducing your monthly food expenditures can help you cut your overall budget and free up money for other necessities. If you qualify, benefits are based on household size and range from $100-$900 per month. Find out more about SNAP eligibility requirements and benefits.

How Much Debt Does the Average Person Have?

Nobody wants to be known as below average, right? But in the case of debt, that would be just fine.

The average U.S. household with debt in January of 2017 owes $134,643, according to Nerd Wallet. That includes credit cards, mortgages auto loans, student loans and other forms of debt. That debt burden costs the average household more than $6,600 in interest per year (about 9% of the average income).

If you average in the households that live debt free, the average American household debt drops to just over $90,000.

Here’s the breakdown of American household debt in January of 2017:

Credit Cards 

$16,748 is the average owed for households with credit card debt. The total U.S. credit card debt is $733 billion, accounting for 46.5 million households (35%). Including all households (with debt-free averaged in), the average credit card debt is $5,517.

Mortgages

$176,222 is the average for households with mortgage debt. The total U.S. mortgage debt is $8.48 trillion, accounting for 48.9 million households (36%). Including all households (with debt-free averaged in), the average mortgage debt is $60,700.

Auto Loans

$28,948 is the average for households with auto loan debt. The total U.S. auto loan debt is $1.16 trillion, accounting for 39.1 million households (29%). Including all households (with debt-free averaged in), the average auto loan debt is $7,871.

Student Loans  

$49,905 is the average for households with student loan debt. The total U.S. student loan debt is $1.31 trillion, accounting for 25.5 million households (19%). Including all households (with debt-free averaged in), the average student loan debt is $9,153.

All Debt Combined

$134,643 is the average for households with debt. The total U.S. debt is $12.6 trillion, accounting for 92.6 households (69%). Including all households (with debt-free averaged in), the average household debt is $90,336.

Don’t be scared by all the debt.

Mortgage debt is considered “good debt,’’ as long as it’s a reasonable amount, particularly when interest rates are low. Many people can earn more money by investing instead of paying off their home in cash. Mortgage debt is backed by an asset that should gain value over time.

A mix of debts can help build your credit score. Ten percent of the FICO-scoring formula is based on your mix of credit accounts. If you are responsible with several kinds of credit accounts — not just one — that reflects well with lenders.

Credit card debt and other high interest debt is considered “bad debt’’ because the interest you’ll pay generally outweighs any benefits you receive, such as helping your credit score.

More Debt Relief Statistics


Sources

(El Issa, E.)(ND). 2015 American Household Credit Card Debt Study. Retrieved from https://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/

(Williams, F.)(ND). Measuring Average Credit Card Debt. Retrieved from http://www.creditcards.com/credit-card-news/average-credit-card-debt.php

(Picchi, A.)(2015, March 10). America’s Skyrocketing Credit Card Debt. Retrieved from http://www.cbsnews.com/news/americas-skyrocketing-credit-card-debt/

(Parrish, L. and Harnick, E.)(2014 June). State of Lending: Debt Settlement. Retrieved from http://www.responsiblelending.org/state-of-lending/reports/12-Debt-Settlement.pdf
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