Do you feel as though you are drowning in debt? If your debt is more than you can afford, you will need to take action immediately, or it’s only going to get worse. For most consumers close to their credit limits, it would take 20 years to pay off a credit card by making only the minimum payments. If you are wondering if you will ever be able to pay back the interest on your bills (especially credit cards), let alone the principal, here we suggest some possible options for you.
If you have any savings, tap into them to pay off your creditors. This can give you breathing room while you adjust your spending.
Try to negotiate with creditors. You might be able to get some of the debt forgiven or a lower interest rate.
If you have money at lower interest rates available from other sources, consider borrowing it. This includes family, friends, your life insurance policy, home equity, or even your 401(k).
Enter a Debt Management Plan (DMP) through a non-profit Credit Counseling Agency (CCA). Qualified applicants receive credit counseling and benefits that can include waived late fees, reduced interest rates, account “re-aging” (so your payments are considered “current”), and one monthly payment, since the plan distributes payments to all of your unsecured creditors. You will also stop getting collection calls to your house.
To qualify for a DMP, you typically need to meet a few requirements that can include owing at least $4,000, at least one credit card and another account (can be another credit card) outstanding, a need for 10-40% in your unsecured debt payments, and a steady income source.
As a last resort, you can consider filing for bankruptcy and face the consequences when you try to get credit again in the future.