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5 Step Process to Getting Credit Card Debt Under Control

Updated on January 4, 2011
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Dealing with credit card debt can easily start to feel overwhelming. As time goes on, the problem seems to just get worse and worse. You fall behind on payments and that causes fees so your debt climbs and it just feels like you’re never going to get out of it. However, you can take the bull by the horns and get that credit card debt under control.

Here’s a five-step process to help you deal with your debt. Note that the steps are placed in order based on how serious they are so you should try the first steps before moving on to the suggestions towards the end of the article.

1. Create a budget and start paying down your debt more aggressively. The first thing that you should do is to try to get the debt under control yourself. This requires that you sit down and look really seriously at the situation that is happening with your finances. You need to look at how much money is coming in each month, what your monthly expenses are and where you can increase income and decrease spending in order to have more money to put down towards debt repayment. I won’t lie; this isn’t very fun. You may need to temporarily take on a second job or you may need to cut out a lot of the “fun stuff” that’s costing you money in your life. The good news is that once your debt is repaid you can slowly start decreasing your work hours and / or increasing your spending a little bit. Just make sure that you don’t go back into debt again!

2. Take out a debt consolidation loan. If you have good credit but are just in over your head because you have too many different payments to make then you may want to consider getting a debt consolidation loan. You may get one through your bank or choose to get one through an alternative source such as a peer-to-peer lending club. You may even just transfer all of your credit card balances to a single card with a high credit limit and a low interest rate. The goal is to put everything together so that you can make just one monthly payment that is lower than the current sum of your many monthly payments.

3. Contact your lenders and ask for help. If you’ve already started to miss a few payments because your debt is spiraling out of control then it’s time to contact your lenders and see what they can do for you. You want to be aggressive in taking action to contact them yourself before they start contacting you or even sending collection agencies after you. That’s because they’re more likely to help you out if you contact them and let them know that there’s a problem. What you need to do is to call your lenders and let them know that you’re having trouble making payments but do have every intention of repaying your loan. Ask if there is a way revise your payments to make them more manageable. You may have to work your way up the ladder, speaking to several people at the credit card company before you find the person that can help you. Don’t give up. Also, remember that you can also contact the lenders for loans other than your credit cards. You can get a deferment on student loans, for example, or refinance a mortgage to lower those payments. This would free up some money to pay off your credit card debt.

4. Get credit counseling and seek assistance from a debt management company. Now, you definitely have to beware when you are doing this because there are a lot of companies out there that really just scam you. But there are also some great companies that can provide you with valuable credit counseling services. There are also great debt management businesses that will work with your credit card companies to resolve the issue and make it possible for you to repay your debt in a manageable way over time. You should shop around, read reviews and ask for recommendations before selecting these services.

5. Get a lawyer and file for bankruptcy. If you have tried all of the other options and your credit card debt is still out of control then you may need to file for bankruptcy. This is something that you can do on your own if you want to. However, it is generally recommended that you hire a bankruptcy attorney who can work out all of the details in your best interest. It does cost some money outright but can save you more in the long run. Do know that there are a lot of drawbacks to filing for bankruptcy (not the least of which is that it will be hard to get loans for several years to come) but it sometimes is the only option for people dealing with absolutely out of control credit card debt.

Basically, what you want to do is try to handle the situation yourself to the best of your ability. You may need to seriously cut corners to do that and you’ll really need to learn to advocate for yourself in terms of working with lenders. If the situation is so bad that you can’t get it under control by taking those actions then it’s time to consider calling in the professionals. Either way, the problem will eventually get resolved. Just hang in there!

Comments

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  • lctodd1947 profile image

    lctodd1947 

    7 years ago from USA

    I think that bankruptcy is definitely a last choice. It seeems that so many people file for a BK and then the credit card companies send them invitations to sign up as they know that the BK can't happen again for 7 years. There they go right back into the same situation. It is a tough situation for so many.

    Thanks for your solutions.

  • mon012 profile image

    mon012 

    7 years ago from NYK

    wow, great Kathryn, good hub

  • Chrisagbe profile image

    Chrisagbe 

    7 years ago

    Hello Kathryn you've provided all the recommendation to tackle problems of credit card debt. So useful are your steps that when followed, one wouldn't even get to the worst scenario which is filing for bankruptcy. A very informative hub, i must say.

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