Ways to Pay Back Your Credit Card Bills

Debt Settlement

It is a service that aims at reducing the principal amount owed on credit cards. Through negotiating with your creditors, you can reduce debt levels by 40 to 60 percent, dramatically lower your monthly payments, and pay their debts in as little as 12 to 30 months. It is the fastest and cheapest way to become debt free without filing personal bankruptcy, but settlement is typically only a suitable option for consumers who are genuinely overextended and unable to afford their minimum payments.

Credit Counseling
This service aims to reduce your interest rates on credit cards. By lowering the interest charges to as little as 0-12%, a consumer can pay their credit card debt off in four to five years and lower their payments. The payments are generally higher than those in debt settlement, so consumers experiencing a financial hardship may be better suited for a debt negotiation program.
Personal Bankruptcy
Filing bankruptcy isn’t exactly paying off your debt. That is, the debts are never fully satisfied; you are simply relieved of your legal obligation to them. Due to the catastrophic credit effects, personal bankruptcy is generally considered a last resort for most debtors. However, for consumers with no income or savings to pay their debt, it may be the only option.
Paying More than the Minimum
Minimum payments on credit cards are generally 2-4% of the outstanding balance. For example, if you owe $10,000 in credit card debt, you can expect to pay $200 up to $400 every month of the minimum.
Debt Questions

1. Should I pay any old or bad debts on my credit report?

This depends on how old or past due the debt is, what state you live in, and how much it is affecting your credit negatively. If it has been more than 7 years since you last made a payment on the bad debt, then it shouldn’t even be reported on your credit to begin with, and therefore, you should either dispute it with the credit reporting agencies or settle it with the understanding that they will erase it from your credit altogether.

2. What debt should I pay down first?

In order to save the most money and get out of debt as quickly as possible, you should always attack the debt with the highest interest first. Some pundits, like Dave Ramsey for example, suggest that the best account to attack first is the one with the smallest balance, regardless of the interest. The logic for this is that you need to build of momentum and confidence so that you can make progress on your balances. Although this is an intriguing concept, being self-disciplined and attacking the debt with the highest interest rate usually makes the most sense.

3. In credit counseling and debt settlement, are there penalties for paying back your bills early?

Absolutely not. If you encounter a company who has pre-payment penalties, avoid them at all costs. To get matched with a reputable firm, please feel free to fill out a form.

4. Should I use an equity loan to consolidate my credit card debt?

As reiterated throughout our website, “Robbing Peter to Pay Paul” is not a recommended course of action. There are several downsides; chief among them is you are putting your home at risk by using an equity loan.

5. Are there such things as grants to help people pay their debt?

Unfortunately, there are no government grants or free money in terms of dealing with credit card debt (at least none that PayingPaul.Com is aware of).

6. Do you recommend using or borrowing from my 401(k) to pay an unsecured loan I have?

This depends on a number of factors and what you specifically are suggesting. Typically, borrowing against your 401(k) is a much more advisable tactic than taking the money out because if you are able to pay it back within 60 days, there are no early withdrawal penalties. Keep in mind, however, that there is 10 percent early withdrawal penalties assessed on your taxes if you do fail to pay it back in time.

7. Why is PayingPaul.Com so staunchly against taking out consolidation loans to get rid of credit card debt? Doesn’t it make sense to do this if the interest rate will be so much lower?

There are several reasons for our stance on debt consolidation loans. First and foremost, any consolidation loan worth getting will almost certainly require you to use your home as collateral. After all, the vast majority of unsecured personal loans will have an interest