When Tennessee consumers are struggling with overwhelming credit card debt, where should they turn? Bankruptcy, debt settlement and debt consolidation are touted as popular options. What else can be done to get a person back on track financially?
The first step may be to try do-it-yourself money management. Sometimes consumers have the willpower to pay off their credit card debt without any outside help. They just need information about the process and what they need to do to accomplish their goal of being debt-free.
For those who need a little bit more education and personalized instruction, personal finance classes and debt counseling may be the way to go. Personal finance classes are taught in a classroom setting and allow everyone to discuss their situation with others. Debt counseling, on the other hand, is much more personalized. It discusses a person's financial issues and helps the person create a budget and stick to it.
Debt consolidation involves taking out a loan to pay off debts. Although this can help increase one's credit score, it comes at a cost. These types of loans typically come with high interest rates and fees. Those interested in this course of action may want to get a home equity loan or personal loan and do the same thing, although without the added fees.
Debt settlement is another option. This option allows consumers to make an offer to their credit card company. For example, if they owe $10,000, they might offer $5,000 and be done with it. However, not all companies will accept these types of offers, especially if the consumer is making minimum payments regularly.
If all else fails, bankruptcy may be the best option. It does have some downsides, but it can wipe out debt while allowing consumers to keep assets. Whatever option a person chooses, he or she must learn from the experience and understand how to effectively use credit cards to avoid going into debt again.
Source: The Motley Fool, "6 Ways to Get Credit Card Debt Help," Sally Herigstad, May 31, 2014