Reduce Credit Debt

To reduce credit debt means paying off creditors and slowing down the use of using credit. Americans have become used to paying for everything with a credit card. From movies to groceries to paying utilities, the credit card has had easy access. Then, the monthly minimum becomes so large that it is impossible to meet each month. Soon the debt collectors are calling and writing.

For the consumer who wants to reduce credit debt, there are choices. They can cut up the credit cards, and start paying down the principles while living on a cash basis. It takes real discipline and a determination to succeed. What many don't realize is that there are more formal options. Programs like debt management and debt settlement can be effective for those who can no longer manage themselves.

While the two programs have different qualifications and are for different circumstances, they both work well. And, neither of them require a loan as traditional debt consolidation does. The programs are run by debt resolution companies, who have staffs of expert negotiators. By working with creditors, the principle amounts are reduced to as much as 50% Some companies will claim that they can reduce them even more but those situations are very rare. Creditors have an incentive work make these reductions for a couple of reasons. One, they would rather settle for a partial amount if they think the consumer might make a declaration of bankruptcy. In that case, they would receive nothing. Two, the government bailout money provided to large lending institutions was partially for this very reason - to help consumers.

To reduce credit card debt and eliminate it entirely, it requires stopping payment to creditors. The money is put in a special account and when enough money has amassed, the negotiators go to work arranging reductions. The saved money is used to pay off the creditors. These methods work well to not only satisfy creditors, but to also allow the consumer to get back to a less stressful life.

It is important to realize that while working through either debt settlement or debt management that credit ratings will drop significantly. Unlike bankruptcy, however, once the loan amount is paid off, it will be marked as settled, and the consumer can then start to rebuild a good rating. Since the programs can be completed in from twelve to thirty six months, it is also less time than other methods reflect on a rating. Bankruptcy shows up for ten years.