If you have outstanding credit card debt and are trying to find solutions on how to pay off your credit card debts, there are a few popular method and strategies to it. Sometimes it may be difficult when you're facing agressive creditors and collection agencies.
1) Snowball Method - List your debts from the lowest balance to the highest balance, pay the minimum on all your debt and divert all extra payments towards the lowest debt balance. This method is a moral booster although not the best, dollar wise. Keep repeating the strategy until your debts are paid off.
2)Avalanche Method - List your debts from the highest rate to the highest rate, pay the minimum on all your debt and divert all extra payments towards the debt that has the highest interest. Keep repeating the strategy until your debts are paid off. This is the best method that will ensure that you pay the least amount of interest over time. Although not as morale boosting as the Snowball Method.
3) Debt settlement programs - their target client are people who have debts over $10,000. An option if you're struggling with agressive creditors and lenders and just can't find your way out. They have experience negotiating with creditors for cheaper interest rates or to reduce the balance of your loan. Although there will be fees that probably apply.
4) Debt consolidation loans - Involves taking out a personal loan or organising a line of credit loan against your mortgage and using it to pay off your various creditors and lenders in one go. This enables you to refinance all the various loans into one, simple loan and usually at a lower interest rate.
5) Rolling the various loans into your mortgage via refinancing - This is always the best, however not always feasible for everyone. It's not feasible for you if you have no equity in your mortgage, if you don't have a mortgage or if your house is underwater (your mortgage balance is more than what your house is worth). If you have equity in your property, you can refinance your various loans into the mortgage and this will be amongst the cheapest form of financing. You have to ensure that if you utilise this option, you need to maintain your current payment so that you don't stretch out your debt for 25-30years. If you don't, then you'll discover that in 30 years time, you will still be paying for the dinner that you charged onto your credit card!
Negotiate with your creditors and lenders
Sort out all your bills and debts before you try any of the steps above. Call each of the creditors and see if you can arrange a payment option with them. If it's a small bill, see if you can get your creditor to reduce the bill with the condition that you can settle the bill immediately if they can assist by reducing the amount.
How you can erode your debts faster? Make extra repayments using the Snowball or the Avalanche Methods and always negotiate with your creditors. Keep them in the loop.