Debt reduction is the fastest way to become debt free
If you are in deep debt, don't give up and lose hope because there is a solution. But in order for you to get rid of your credit card debt once and for all you have to be in it for the whole game. No quick fix debt management systems can totally free you from the stresses of credit card debt. Some quick fix measures at debt reduction are designed as damage-control measures which try to get around the issue without eliminating the debts.
They can also become increasingly complicated every time you try to quick fix a bad situation with another problem. Of all the plans for getting rid of debt, debt reduction is the best avenue to be taken.
Of course, if you are in over your head with debt and bankruptcy is right around the corner, the last ditch chance to pay back your debts is through a aggressive form of debt reduction called debt settlement. With this avenue, a debt settlement firm attempts at a compromise with your debt collectors to settle your debt at an amount a lot less than what the current balance is.
While this is going on, you are supposed to save enough funds for a bulk settlement payment. If the negotiation is approved, you will receive a settlement letter from the debt collector that the debt has been settled or paid. The creditor will also be able to notify the credit bureaus that the same debts you paid have been satisfactorily fulfilled. Settlement is particularly attractive for debt collectors during times of rough monetary circumstances for the debtor, when he is near edge of filing bankruptcy; in which situation the collector is faced with the chance of losing more money by getting only a fractional amount of the original balance.
Credit card debt settlements are only applicable to unsecured debts such as those concerning credit cards and medical bills. Also, be aware that this is an last resort alternative to bankruptcy. So you should ready yourself for the respective consequences. This would include things like a decreased FICO credit score, an increase in collection calls, the potential chance of being sued, tax obligations, and that all-too-familiar necessity of coming to a terms with your creditors.
If your predicament is not as shaky as the one described above, then you can get out of debt easily enough. All you need is a plan, patience, and a desire to give a shot to the most recent of debt relief plans: snowballing your debt or debt repayment. This practical system of reducing debt is especially geared towards revolving credit accounts such as those involved in credit cards.
In order to get your debt out of your way, first make a organized list of all your dues in ascending order from the smallest balance to the largest (notice that the order is not based on the APR, but on the amount owed). If some bills come close in the value of amount, move the one with the highest interest to a elevated spot on the list. Then commit yourself to pay the minimum payment on all bills.
If surplus funds are left, add this to the dues on the smallest debt, and keep your focus on finishing your dues on the smallest bill until it is paid off completely. As soon as the smallest bill is removed from the list, repeat the same process for the next ranked spot, this time adding the previous minimum payment for the cleared debt onto the funds allocated for the next.
Don't stop this process and you will be shocked at the speed at which you can rid yourself from debt.
Steve Martin is a credit card debt analyst with the US Consumer Advocate, which practices in credit card debt reduction.
Published December 6th, 2007
Filed in Business, Management
