Credit Card Debt Consolidation Options

Becoming debt free is possible. No matter what plunged you into debt, job loss, school loans, or even lack of discipline, there's hope. Credit card debt consolidation programs are intended to help people get their lives back on track.

What is Debt Consolidation?
Debt consolidation is the process by which you convert high interest debt into a more manageable sum so you can pay it off faster.

2 Approaches

Work with a credit card debt consolidation service - these are counselors who work with you to get rid of debt, often for free or at low cost.

Take out a loan to pay off your high interest credit cards. People often turn to family members, home equity loans, or in the worst case, a new credit card with a lower interest (for now).

Which is right for you? It depends on several factors. Are you a high-energy person who likes challenge and wants to go to bat against your creditors? Or do you feel like you've had enough and just want someone else to handle it?

Many credit counseling services do things that you can do yourself for free. You can try to negotiate with your creditors to pay a lesser amount. If the creditor realizes you may be considering bankruptcy, then they may agree to take some percentage from you rather than receive nothing. You can also ask for a lower interest rate on your credit card. Keep in mind that your creditors are not going to make it easier for you to make smaller payments out of the goodness of their heart. They realize that if they don't help you out, you may file bankruptcy and they will likely collect nothing.

Home Equity Loans
With a home equity loan (a second mortgage) you are given a bank loan against your property and you use this money to pay off your high interest credit cards. Typically, you are required to use the equity in your house as collateral. Increasing debt by mortgaging your house for some people is not a good idea. Many people report that re-financing with a consolidation loan or a second mortgage pushed them over the financial brink. Unless you put a stop to new charges, you will never escape the merry-go-round.

Debt Counseling
There are a lot of counselors out there, and some have given the business a bad reputation. Look for a free service by a non-profit group.

Make an appointment with a counselor. You may feel your debt is overwhelming and bankruptcy is the only way out. Or, you may feel it is the easiest way to start over. Before filing you must make sure that the kinds of debts that you owe are dischargeable. For example, if you used the equity in your house as collateral for a loan, the loan may not be eliminated in bankruptcy. Many times when you file bankruptcy you will still have to eventually pay back creditors but now your credit report is tainted by the stigma.

Creditors Must Stop Calling
The good news is, once you start working with a debt professional, creditors have to stop calling you. It is illegal for a debt collector to keep calling you after you have started making an effort to pay back the debt. Make sure you know your rights. Companies know that if you are working with a counselor you are trying to honor your commitment to them and they appreciate that. It takes willpower and determination to pay off your debt, but with a little bit of help from a professional, you can get back on track.