There are several options available for eliminating your credit card debt that do not necessarily require that you use the help of a third party. One of the most well known payment strategies today is Dave Ramsey’s “Debt Snowball” concept. Dave Ramsey is a national radio host who advises consumers on ways to get out of debt without declaring bankruptcy, taking out a loan, or using the help of debt consolidation services. Underlying his debt reduction plan is the notion that financial problems are as much of an emotional issue as they are a mental one, and therefore, in order to tackle these problems intelligently, one must approach them emotionally. This being the case, Ramsey advises consumers to tackle accounts one by one, starting with the smallest balance and moving to the largest one. While most financial advisors always suggest tackling the credit card with the highest interest rate, Ramsey ignores this logic completely. To him, the most important piece of any debt repayment plan is momentum. By getting rid of the account with the smallest balance, the debtor can gain momentum and hope, which will propel him or her forward in their quest to become debt free. It’s called the “Snowball” method because the person will supposedly gain steam as the program progresses, much like a snowball rolling down a mountain.

Unfortunately, most financial advisors disagree sharply with the “Snowball” strategy, and instead advice consumers to pay down the balances with the highest interest rate first. By paying off the account with the highest interest rate first, it will be less expensive to get out of debt, and therefore, you can become debt free much faster, which should be anyone’s goal.
The problem with most self-help debt plans is they assume that the person can afford to pay back their balances in full without an adjustment in the terms of the contract with the lender or credit card companies. For people who need a minimum monthly payment, are overwhelmed with the number of credit card bills they owe, or need to get out of debt fast, then seeking the help of a credit management organization may be the smart move.

Debt Negotiation Strategies

Debt negotiation, also known as debt settlement, involves negotiating with creditors to get them to lower the amount that the consumer owes. In some cases, a credit card company will agree to reduce the debt owed by as much as 70 percent, but in most cases the settlement reached will vary between 40 and 70 percent of the principal balance. Settlement is the fastest way to get out of debt outside of filing personal bankruptcy, and it offers the lowest monthly payment.

Debt Counseling Methods

Credit counseling is another form of consumer consolidation and it involves working with credit card companies to lower the interest rate of the consumer. Typically these programs last between 4 and 6 years, and the client can enjoy a nice reduction in their monthly payment as well, although not as dramatic as if they enrolled in debt settlement. Another important benefit of debt counseling is you can actually establish a positive payment history and get back on track financially (assuming you owe old or bad debt that has been in collections). Many of the organizations that offer these types of plans are also non-profit; although that does not ensure that their services are affordable or legitimate.

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