Trying to deal with massive credit card debt can just about ruin your life. The stress of being seriously in debt can even cause physical problems up to and including heart disease, diarrhea, fibromyalgia and even an early death.
The worst thing you can do if you’re facing massive credit card debt is to try to ignore it. If you do this, things will only get worse. Interest will pile up on interest, penalty fees will pile up on penalty fees and your credit card debt will continue to multiply like a cage full of rabbits.
When it comes to managing big debt the two critical words are “take action”. And it needs to be immediate action. Don’t put off dealing with your debt another day. Make a plan for managing it and get started now.
Face the facts
The odds are you’ve been ignoring that massive amount of credit card debt. You probably have stacks of unopened envelopes on your desk or kitchen table. You may have even lost track of how much you actually owe. In some cases, ignorance might be bliss but this is not one of them. The first thing you must do is make a complete and comprehensive list of your credit card debts and then total them up. The easiest way to do this is with a simple spreadsheet program. You will need five columns as follows:
- Name of credit card company
- Amount owed
- Interest rate
- Minimum payment required
- Payment due date
Get a debt consolidation loan
At this point you have several options. One of these is to get a loan and pay off all that credit card debt. Given the fact you’re facing a massive amount of debt you may not qualify for a personal loan. But if you have equity in your home you might be able to get either a home equity loan or homeowner equity line of credit. Both these loans are currently available with APR’s of less than 4.0%. However, if you choose one of these loans to consolidate your debts you’ll be exchanging money for time. In other words, you’ll likely have a fairly low monthly payment but your term will be anywhere from 10 to 30 years.
Transfer your balances
If you owe on multiple credit cards a second option is to transfer your balances to a card with a lower interest rate or, better yet, one with 0% interest for some period of time. These 0% balance transfer cards offer anywhere from 6 to 22 months’ interest free, which might be enough time for you to get caught up on your credit card debt. However — spoiler alert — you may not qualify for one of these cards because of your massive credit card debt.
Snowball your debts
If you did what we advised earlier and put those credit card debts in a spreadsheet you could now use the snowball method to pay them off.
The snowball method is where your order your credit card debts with the one with the smallest balance at the top down the one with the largest balance. Next, you would do everything possible to pay off that debt with the smallest balance. That should go pretty quickly and once you have it paid off you’ll have extra money available to pay off the debt with the second smallest balance and so on. Of course, you’ll need to continue making the minimum payments on those other debts.
Get consumer credit counseling
A fourth option is to get consumer credit counseling. This is where you have a counselor who will review your finances and then recommend some options for helping you become debt free. The most popular of these options is called a debt management plan (DMP). If you choose this option, you won’t be required to pay your lenders anymore. Instead, you will make one payment a month to the credit counseling agency and it will distribute the money to your lenders. DMP’s typically take anywhere from 3 to 5 years to complete and will require you to close all those credit card accounts. However, the monthly payment on a DMP is certain to be lower than the total of the credit card payments you’ve been making. And once you complete your DMP you should be virtually debt free.
Of course, the ultimate way to get rid of a massive amount of credit card debt is to declare bankruptcy. This is an option you shouldn’t choose without putting a lot of thought into it. While a chapter 7 bankruptcy will discharge or eliminate that massive credit card debt it will leave a stain in your credit history that will last for 10 years. Once you’ve declared bankruptcy you’ll find it very difficult to get any new credit for 2 to 3 years, you may see your insurance premiums bumped up and you might even have a hard time renting a house or apartment.