Finding Credit Card Debt Relief

Step 1: Credit Counseling

Credit Counseling is not a debt solution in and of itself. It’s an easy, free way to find the debt solution you need. A certified credit counselor evaluates your current financial situation by looking at your income, expenses, debts, credit, and budget to see where you stand so they can help you find the right solution for your needs.

Step 2: Weigh your options for debt relief

The credit counselor’s job is to provide all the information you need to make an informed decision to get out of debt. Based on your assessment, the counselor can explain your debt relief options, such as debt management programs, debt consolidation, debt settlement, and bankruptcy. They’ll explain the difference between the available options and weigh the pros and cons of each in relation to your specific circumstances.

Once they answer all your questions, you may want to do some research before making a decision. These free resources can help you zero in on the best solution for your needs.

• Explore all your options for debt consolidation »
• Compare consolidation to other solutions »
• See debt relief in action for other credit users in your state »

Step 3: Create a plan & take action

Once you choose the debt relief program that’s right for you, your counselor will guide you through the process. If you choose consolidation, settlement, or bankruptcy, they’ll provide clear next steps. For a  debt management program , we’ll help you enroll as soon as you’re ready.  

Then our team will go to work. We call each of your creditors to work out three key factors that will make it easier for you to get out of debt:

1. They agree to accept payments through a debt management program
2. To reduce or eliminate interest charges applied to your credit
3. That they will stop tacking on penalties and fees to your debt

Once all your creditors sign off, you start the program. You make one payment to us each month; then, we distribute it to your creditors on your behalf. 

Here’s what you can expect from a debt management program:

Specialized help for military Service Members and Veterans

If you currently serve or have served in the military, you face unique financial challenges. Consolidated Credit works closely with Southern Command, Army OneSource, and the Department of Defense to help military Service Members and Veterans get the financial help they need. We also offer specialized debt help for military personnel.

Get more information about military debt consolidation »

Getting debt relief for other types of debt

Credit card debt is not the only type of debt you can include in a debt management program. You can consolidate almost any unsecured debt, not including student loans. This includes debt consolidation loans, unpaid medical bills that have gone to collections, and even some payday loans. If you’re struggling with student loans, then you will need a specialized type of debt relief.

• Learn more about consolidating medical debt »
• Overcome challenges with payday loans »
• Get information about student loan consolidation »

A closer look at debt relief options

Debt relief can take many forms, but options that include some type of debt consolidation debt consolidation are usually recommended. These methods allow you to repay your debts while potentially lowering your monthly payments and accelerating your payoff. There’s also no credit report damage, which you see with other solutions like debt settlement and bankruptcy.

There are three basic ways to consolidate credit card debt:

Option 1: Credit card balance transfer

Overview

A credit card balance transfer moves existing debt from one or more high-interest credit cards to a new card with a lower or 0% introductory interest rate. This promotion period usually lasts between 6-24 months, giving you time to pay off your debt without incurring new interest charges. 

How it works

1. You open a balance transfer credit card, qualifying for rates and terms are based on your credit score.
2. Then, you transfer the balances from your existing accounts to the new account with added fees.
3. You have a set number of months to pay off your debt with no interest charges.

Credit limitation

This option only works if you have good credit; excellent credit is better. The better your credit, the better APR you’ll be offered, and that longer the introductory period will be. 

Be aware of fees

Balance transfers always involve transfer fees, even when you have 0% APR. You pay a fee for every balance you transfer – anywhere from $3 to 3 percent.

Calculate carefully to eliminate the balance before the clock runs out. If you can, this will give you the biggest cost savings because there are no interest charges. Otherwise, the interest rate on your debt could be even higher than it was initially.

Learn more about credit card debt transfers »

Option 2: Consolidation with a personal loan

Overview

You take out a low interest unsecured personal loan  to pay off your existing debts. This solution offers fixed monthly payments, typically lower than your high-interest credit card payments, making debt repayment more manageable.

How It Works

1. Check rates with your bank or credit union, other financial institutions, and online lenders. Your goal is to find the best rates and terms.
2. Apply for the loan that fits your needs. The lender bases your approval on your creditworthiness.
3. Once approved, you use the money you receive from the loan to pay off your debts; in some cases, the lender will send the money directly to your creditors.

Credit limitation

Like a balance transfer, a personal debt consolidation loan is usually only a viable solution for consumers with good credit scores. The higher you score, the lower the interest rate you can qualify for on the loan. APR of 5% is ideal, but anything below 10% may be enough to provide the relief you need. If you can’t qualify for a rate below 10%, look for other options.

Be aware of fees

Lenders may charge various fees, such as origination and administrative fees, which will be disclosed in the loan agreement.

When using this option, you want a loan with a term of five years or less. Any more than that means your total repayment costs will be too high. Just keep in mind that a shorter term means higher monthly payments. Calculate carefully to make sure you can afford the payments.

Explore personal debt consolidation loans »

Option 3: Debt management program

Overview

A debt management program provides professional help consolidating your debt without taking out a new loan. If you’re struggling to make progress on your own, a credit counseling agency acts as your advocate, negotiating with creditors to create a manageable repayment plan and potentially lower your interest rates and eliminate fees. 

How It Works

1. First, you consult a certified credit counselor to review all your options. The counselor will ensure a debt management program is the right solution; otherwise, they can direct you where to go.
2. If debt management is the right choice, they can help you enroll. Together, you find a monthly payment that works for your budget.
3. Then, the counselor calls each of your creditors to get them to sign off on the adjusted repayment schedule.
4. They also work with creditors to reduce or eliminate interest charges, as well as to stop future penalties.

Credit limitation

You do not need to have good credit to be enrolled in a debt mangement program.

Fees

There are some fees that come with being in a debt management program. These are minimal (capped at $79) and are included in your repayment plan.

Learn more about a debt management program »

A few debt relief options you want to avoid

The three options outlined above are not the only options that consumers can use. There are other ways to find debt relief – we just don’t recommend them. At Consolidated Credit, we promote a “do no harm” strategy regarding debt relief. In other words, your debt solution should not put you in a worse position than when you started.

When used correctly, each of the solutions above can eliminate your debt without causing credit damage or worsening your financial situation. Other solutions can decrease your credit score or negatively impact your long-term financial plan.

For instance, you can:

1. Use a home equity loan to pay off debt. However, this puts you at an increased risk of going into foreclosure. If you miss payments, you could lose your home.
2. Tap into your 401(k) or IRA, but you may face early withdrawal penalties. It also drains savings you need to retire on time later in life.
3. Settle the debt for less than you owe, but this will damage your credit score. You may also be required to pay income taxes on your next tax filing for the amount you settled.
4. File bankruptcy, which can allow you to get out of debt in as few as 90-120 days. However, you can damage your credit for up to 10 years.

Good ways to find relief versus bad ways

The right debt relief solution will help you reach zero without creating new financial risks or damaging your credit. When it comes to bad ways to seek debt relief, there may be some circumstances where using one of these solutions would be the best option. However, you should exhaust every other option before considering these last resorts.

Deciding it’s time to get professional help

Here’s a simple truth: Minimum payment schedules were never designed to help you get out of debt. Interest charges are revenue and profits for credit card companies, which means they’re quite happy if you stay in debt forever.

Thus, minimum payments only pay back a small percentage of what you owe – usually around 2%. It’s more affordable monthly, but the trade-off is that you stay in debt for a long time. Many times, if you only make minimum payments, you could be paying those purchases off for decades.

And that’s only half the problem. If you run up high balances, then even larger payments may not make a dent quickly at such high rates. Depending on your available cash flow and interest rates, paying off your credit cards efficiently may be impossible.

Try a simple test:

1. Use the debt calculator below to see how long it would take to pay off just one of your big balances. You may want to review your budget to see if there are any expenses you can cut to free up more money for debt elimination.
2. Enter the balance and your current interest rate; if you don’t know your payment schedule, check your statement or choose 2%.
3. Now weigh two other options: Pay the minimum plus a little extra or make a larger fixed payment.

That’s just one debt. Now think, how long will it take to pay all your debts off? If you don’t like the answer, it’s time to find debt relief.

On the other hand, if you still want to try paying off the debt with regular payments, follow the steps below. They will increase your chances of success.

Step 1: Negotiate lower rates with your creditors

A lower rate means more of each payment can go towards the debt instead of accrued interest. This does accelerate repayment, especially if you make larger payments.

Your chances of a successful negotiation increase if:

• You’re not behind on your payments
• Your credit score has increased since you opened the account
• You’ve been a loyal customer for a number of years

If you are not successful in negotiating on your own, then that may be a sign you need the help of professional credit counseling services. Having a team of experienced negotiators on your side with established relationships with creditors can go a long way in making sure you get the results you want.

Step 2: Implement a debt reduction plan

A debt reduction plan helps you pay off your debts faster by focusing payments on one debt at a time. You can use methods like the snowball method (paying off the smallest debt first) or the avalanche method (paying off the highest interest debt first). To make either of these methods work, you’ll need to create a budget and cut expenses so you can put more money towards paying off your debts.

We offer resources that describe how to implement an effective debt reduction plan.

Are there government credit card debt relief programs?

Currently, no government-sponsored or government-backed programs provide credit card debt relief to consumers. For example, unlike what you see with federal student loans, you cannot apply to have credit card debt forgiven without penalties. No program allows you to refinance or modify the terms of your credit card agreement like there were with mortgages during the Great Recession.

What the government does provide is oversight and regulation of debt relief services:

• Credit counseling agencies: Through regulations and guidelines, they ensure these agencies operate ethically and provide accurate information.
• Debt settlement companies: The Federal Trade Commission (FTC) has rules to protect consumers from deceptive practices in debt settlement.
• Bankruptcy proceedings: The federal bankruptcy courts oversee and manage bankruptcy cases, ensuring they follow legal procedures.
• Fair Debt Collection Practices Act (FDCPA): This federal law regulates how debt collectors can interact with consumers, protecting them from harassment and unfair practices.
• The Uniform Debt Management Services Act: Offers guidance to state governments on how to regulate credit counseling and debt settlement services. Under this agreement, many states:
  • Only allow registered nonprofit credit counseling organizations to provide debt management services
  • Cap fees for debt management services (fees are also capped nationwide at $79)
  • Credit counseling and debt settlement companies must be accredited by a nationally recognized association that maintains strict ethical standards.
  • Require credit counseling agencies and debt settlement companies to provide financial education and debt relief services.

Does Consolidated Credit adhere to these guidelines?

Yes. Consolidated Credit is a registered 501(c)3 nonprofit organization. We are nationally accredited through the Financial Counseling Association of America (FCAA), a proud National Foundation for Credit Counseling member, and approved by the Department of Justice to provide pre-bankruptcy counseling in our home state of Florida.