Explore Tools to Help You Manage Your Own Credit Card Debt
Every financial situation is unique. But there are several options available if you wish to manage your debt on your own.
Consider Credit Hardship Plans for Debt Relief
If you are struggling to pay your credit card debt, you may be able to renegotiate repayment terms on your own. You have the option to ask each creditor about their credit hardship plans. Sometimes called assistance programs or hardship cases, such short-term plans offer some form of relief to struggling borrowers without their accounts falling into default. Here’s a breakdown of what to expect:
- Fees and Interest Rates: Through a hardship plan, some creditors will temporarily remove fees, lower interest rates or even forgive a portion of your debt.
- Be Sure to Set Up Autopay: You will need to set up automatic monthly payments for each credit card and carefully monitor your accounts to ensure your principal balance is going down.
- Paying More Than the Minimum: You should try to pay more than the minimum amount due as much as possible to save on interest charges. In most cases, you should focus on paying the card with the highest interest rate first to obtain the biggest savings.
- Knocking Out Smaller Balances: If you have multiple cards and have difficulty making all payments on time, you may want to pay off some of the smaller balances first so you will have fewer payments and less potential for late fees. As you pay off each smaller balance, take that payment amount and apply it to the card with the highest interest rate.
- Creditors May Forgive a Portion of Your Debt: It’s important to know that if a creditor agrees to forgive a portion of your debt, it will be reported to the credit bureaus, which may negatively impact your credit rating. Additionally, if the forgiven amount is more than $600, you may have to pay taxes on it.
- Contact Each Creditor: If you have multiple credit card debts, you will need to contact each credit card company separately about their hardship plans.
- Get on a Budget and Stick to it: Throughout this process, you’ll need to create a realistic budget and stick to it. Sticking to your budget will help ensure monthly payments are submitted on time and in full.
Evaluate Self-Guided Debt Payoff Methods
If you don’t qualify for hardship plans or want a different, self-guided approach to paying off your debt, there are two popular methods that don’t require calling creditors but will help you get out of debt with focus and determination: Debt Snowball and Debt Avalanche.
Here’s a quick rundown of how each works:
This approach focuses on paying off your debts from smallest to largest — regardless of interest rate — and snowballing your payments onto the next debts gaining momentum with each paid-off balance until you’re completely debt-free. This method works well for people looking for noticeable results early on, which keeps them motivated and committed to paying off their debts.
This method emphasizes saving on interest as you pay off debt. You focus on paying the minimum payments on all your accounts, then using any remaining money to pay extra on the debt with the highest interest rate. After paying that off, redirect that amount to the account with the next highest interest rate.
What Can I Do Right Now?
You can educate yourself about the credit card repayment process and participate in a free credit counseling session. During a credit counseling session, we review your debt, income and expenses to determine your best path forward. You will receive a credit report summary, customized budget, educational resources and an action plan explaining the debt relief solution that makes the most sense for your situation. You can complete the process online 24/7. Even if you choose to manage your own debt, you may still benefit from receiving the credit report summary, budget and educational resources.
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