The average American household had $5,700 in credit card debt as of the first quarter of 2019. Interest rates on credit card balances can be as high as 29.99%. Therefore, it is important to have a plan to pay them down as quickly as possible. Let’s look at a few strategies that you can use to do so.
Consolidate Your Credit Card Balances
Consolidating your credit card debt can be an effective way to reduce the amount of interest paid. One way to consolidate your current balances is to transfer them to a new card. Typically, new cardholders can take up to 18 months or longer to pay down their balances without paying interest. Other options to consolidate debt include a home equity loan, a home equity line of credit or a personal loan.
Ask for Debt Forgiveness
Credit card companies may be willing to forgive some or all of your debt if you truly can’t afford to pay it. For example, you could offer to pay $5,000 to settle a $10,000 debt balance. In most cases, you will need to pay that amount when the agreement is finalized. Therefore, asking for debt forgiveness may only make sense if you have money in a bank or brokerage account.
File for Bankruptcy
Bankruptcy is not something that you want to file for if you have other debt relief options available. However, if you can’t transfer an existing balance to a new card or obtain debt forgiveness, it can be an effective way to manage your debt. If you qualify for Chapter 7 bankruptcy, it may be possible to have credit card debts forgiven without paying anything at all.
Getting Out of Debt Matters When Relying on Structured Settlements
If you have been injured in a car accident or for any other reason, you may receive payments on a monthly basis. These payments may make up for lost wages or future earnings related to your injuries. It is likely that a structured settlement makes up the majority of your income if you can’t work. Therefore, it is even more important that you get out of debt so that you can make this money last for the rest of your life.
Getting out of credit card debt can free up hundreds of dollars per month that can be used to save for retirement or for emergencies. Therefore, it is in your best interest to start chipping away at that debt any way that you can.