Unemployment, medical emergencies or unexpected vehicle repairs can send people in Texas reaching for their credit cards. Although numerous reasons can cause someone to fall into debt, the balances need to be paid at some point. Debtors have several approaches to choose from when confronting credit card balances and high interest rates.
Initially, people need to halt credit card use, list their debts and interest rates and create a payment plan. With the avalanche method, people scrape together as much extra money as possible and use it to pay the balance with the highest interest. After paying that debt, the payment plan will target the next most expensive debt. Alternatively, the snowball method involves people paying off their smallest loans first and working their way up until all debts are resolved.
Debt consolidation loans represent a second choice. This approach works well for people who have decent credit ratings because that enables them to get a personal loan at an interest rate below credit card accounts. The loan then pays off all debts and leaves the person with a single monthly payment.
Credit counseling services, ideally from nonprofit agencies, offer support to debtors unable to get a debt consolidation loan. The counselor might help a person prepare a payment plan that slowly tackles all debts. This service could include contacting creditors and negotiating lower payments or interest rates.
In some cases, a person might want information about Chapter 13 bankruptcy. This form of bankruptcy sets up a manageable payment plan for a period up to five years. At the completion of the plan, the court might discharge some remaining unsecured debts. An attorney could provide specific advice about the viability of this option for debt relief.