How to Deal with a Runaway Debt Problem

When debt gets out of hand, it may seem like a daunting task trying to recover from it. The issue becomes easier to deal with once you get a better understanding of how to approach it, as Consolidated Credit’s Elaine McPartland reveals.

Debt problems tend to get out of control quickly. What starts as a little financial problem often balloons into a major financial issue quickly, causing you to face severe financial distress and credit damage. Once you start to rely on your credit cards to get by, you wind up driving up your bill payment requirements, so more and more of your income is taken up by credit card debt each month. You juggle bills and struggle to stay afloat. You may even make the situation worse by taking out cash advances or payday loans. Eventually if you don’t find a solution, you wind up in bankruptcy.

Before you ever take out your first payday loan or pull cash out on your credit cards, you need find a real solution to your debt problem. Otherwise, you’re only delaying the inevitable and making your financial situation worse. Your first step should be to review your budget to get an accurate picture of where you are and how bad the damage is. This will help you find the most effective way out of debt.

If you have any cash flow available in your budget or you can temporarily cut unnecessary expenses, then use a debt calculator to figure out how long it would take to pay off your debt using extra payments. Keep in mind that each credit card debt that you pay off, you free up more money in your budget for debt elimination. Run some calculations to determine if you can pay off everything in five years or less.

If you can’t pay off all of your credit card debt in five years, then you need to explore alternatives for debt relief. Consider, if you have high credit scores, looking into options for debt consolidation. This can include a debt consolidation loan through your preferred lender or a credit card balance transfer if you can qualify for a credit card with 0% APR on transfers. If you have low credit scores however, these options will only make your financial situation worse.

In this case, contact a nonprofit credit counseling agency to discuss other options for debt relief with a certified credit counselor. They may be able to enroll you in a debt management program, which consolidates your debt even if you have bad credit scores. As long as you have the means to make a reduced payment on your debt each month, you can usually qualify for the program. You pay back everything you owe, but you do it with lower interest and a monthly payment that’s up to 50% less than what you pay now.


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