You can either consolidate the debt on your own, or use a debt consolidation service. Most people believe you have to use a service because they can negotiate deals with your card company.
You can call your credit card company and tell them you are going through a time of financial hardship and ask them if they have a hardship program. Some do not, but many do…they will lower your interest rate and your payment for a period of six months to give you the chance to get back on track.
If your credit is not already very far behind, you can get a new low interest card with 0% interest on balance transfers and then move the debt from your high interest cards to the new card. The danger with this is that you move the debt to the new card, and then you charge up more money on the old card.
That is why many people use consolidation services. They force you to close all of your credit accounts and they give you one monthly payment. They monitor you, so you don’t have to. The only problem is that you are then left with NO credit cards, and nothing to use in case of an emergency.
It Takes Discipline
You need to be disciplined to pay off your debt. One popular option is to “freeze” your credit – literally. Take your credit cards and freeze them in a block of ice in your freezer. If you have an emergency and need to use them, take them out and let them thaw off.
Whether you freeze your cards or just cut them up, you need to vow now to stop using them unless in the case of emergency or when required (e.g. car rentals).
Pay off your lowest balance card first. This will allow you to set a target and then accomplish something on this path to credit card freedom. Figure out your minimum payments on all of your cards and put a little extra on the lowest balance card. Let’s say you have $450 in monthly credit card payments. After you pay off the first card, apply the money you were paying on the first card to your next lowest card. You will still be paying $450 a month but you will slowly pay off your cards.
You will need to also use discipline in your spending. If you continue to just pay the minimum balance on the card, it will take years to pay it off. Figure out a way to squeeze some extra dollars out each month and pay more than the minimum balance.
Put It On the House
One popular option lately is to take out a home equity loan and pay off your cards. With most home equity lines the interest is tax deductible and is often less than that of your credit cards. Use this option with care as you will end up with less equity in your home which will take time to earn back.
Do It Now
You’ve been thinking about it. You’ve been putting it off. If you are reading this tutorial today and still just thinking about it – stop thinking and do something about it! Credit cards can eat away at your finances. Pay them off!