How to Restructure Debt

There comes a point when you realize that your credit card debt situation is out of control and it's time to do something about it. But what exactly do you do? Answering the question means taking a long hard look at your financial issues, then looking into the various ways to restructure your debt.

Reducing Payments on Existing Balances

Some of the methods to bring your payments into line come with their own issues. Study each option and make the best choice for you. Don't jump on the first one that sounds like a great deal as it may come to bite you later.

Consolidation Loans

The first and most common way to lower payments is to utilize a consolidation loan. This is where all of your existing credit card balances are combined together into one loan with one payment. A potential issue with this type of reduction is the interest rate. It may wind up being higher than the rates on the credit cards.

Pull out each cards statement and write down the APR, the amount you pay monthly and the current balance. Assume you are not going to use the card anymore while paying the balance down. Do the math on each to figure out how much interest you would pay over the time it would take to service the debt. Then combine the balance on all cards, use a monthly payment suggested by the consolidator and work out how much interest you would pay on the consolidation loan. You may find that the credit cards come out better.

Debt Settlements

If you would rather pay a lump sum to clear yourself of the debt, then a settlement is the way to go. You or a third party approach the credit card bank with an offer of so many cents on the dollar to pay off the balance. If the bank accepts the offer, you can eliminate the debt quickly without having to pay a lot of interest over time.

Balance Transfers

Credit card companies are always sending out offers for transfers to cards with low interest for a year or more. Utilizing a balance transfer may need some discipline. As long as you stick to your guns and don't use the old card, you can pay off a lot of debt in a short period of time. It's a good strategy for debt relief as long as it's done right.

Working With an Attorney

A lawyer who specializes in debt relief issues can put you in a stronger position to negotiate your balances down. They will also be able to help get your finances under control and put your life back on track. Credit card banks sometimes try to ignore the credit laws to get more money out of you. It's best to work with an attorney for financial negotiations to keep the creditor on the straight and narrow.