Do you carry a balance on your credit cards each month?
Are you using cash advances or payday loans to make your minimum payment?
Do you use credit cards for basic living expenses?
If you answered yes to any of these questions, you may have a serious credit card debt problem.
When your credit card debts are out of control, and when you find yourself getting farther and farther behind each month, you have four logical options to reduce your credit card debt, with the right choice depending on the severity of your debts and your personal situation.
- Pay them off. This will probably require you to increase your income (more overtime, a second job, etc.), and reduce your monthly expenses. Make a personal budget to determine if this is possible.
- Consider a debt management plan. Under a debt management plan, you repay all of your credit card debt in full but can get relief from interest charges. You will make one monthly payment to your credit counsellor and your credit card debts are usually paid off within 5 years. This works well if you have only one or two creditors and your debts are less than $10,000.
- If you can’t afford to repay your debts in full, a consumer proposal to your creditors may be your best solution. In a consumer proposal, a government licensed trustee prepares the proposal, and if accepted by a majority of your creditors, you will make payments to the trustee according to the terms of the proposal. Under a proposal your creditors may not get all of their money, but they will get more than the final option:
- Bankruptcy. A bankruptcy wipes out most of your debts, and gives you a fresh start, but a bankruptcy also impairs your credit for seven years, and has other consequences.
If you are drowning in credit card debt, our single most important advice is to deal with it now. With each passing day your situation gets worse, so take action now. Contact an advisor for a free debt evaluation, give yourself a fresh start, and get your life back.