How to Pay Off Credit Card Debt With Bad Credit & Low Income

For many Americans, especially with regard to credit card debt. Currently, as per the Federal Reserve Bank of New York, it has reached $1.14 trillion in credit card debt, while the total household debt reached $17.8 trillion.

This problem is largely and particularly experienced by low-wage workers and even those people with a poor credit rating.

With the credit card APRs ranging from 18% to 25% combined with the low income, the option for them to repay their loan seems almost impossible.

Now, don’t panic. With a credit score of 600 or even no income to speak of, high-interest debts can be dealt with in hundreds of ways. 

The guide takes a look at practical methods that have worked for thousands of Americans to gain back their financial independence.

Debt Consolidation Program

This program is beneficial if you have a high credit card debt that comes from multiple credit cards and even other loans, and a debt consolidation program may help.

This occurs when all your outstanding debt, for example, credit card balances on multiple credit cards, is taken and ‘rolled into’ one aggregate sum.

Then, you proceed to pay it off at a low fixed interest rate over an amended repayment term.

Its application would be suitable for those whose credit ratings and income are low. Actually, this simple form of option is only good for the amount to be progressively settled.

Balancing Transfer Card

Transfer your debt from your original credit card (or more) to a balance transfer credit card with zero-to-low APR.

Remember that the low introductory offer only lasts for the first 6-18 months.

Afterward, high three-digit APRs may apply, so try to pay off the full debt within the introductory period if you end up using this method.

Debt Management Program

If you have fewer dollars and a bad credit history, then a debt management program will suit you better.

This is called credit card consolidation, wherein a person’s debt acquired from multiple sources is pooled into one single, manageable, structured payment arrangement.

You might need to meet a credit counselor from a good, reputable credit counseling agency for this. They might be able to negotiate an interest rate for you.

Note that you may have to close the credit card account if you implement this strategy because you would need to reform your payback plan.

The credit card issuer may demand you prove you will not continue creating more debt with the credit card using this plan.

Thus, your credit score could go down even further if you use this method but only for a short period.

Debt Avalanche

You can pay off the credit card balance with the highest interest first and so on. This way, you can avoid paying extra interest over time, which is useful if you have a low income. 

Yet, it will likely take a long time to repay the debt fully using this method. So, select your strategy carefully. 

Debt Snowball

Debt snowball is a type of debt repayment strategy debtors can use to pay off their debt- starting with repaying the smallest balance first.

This choice is good for people with low incomes and bad credit profiles who fare better and see visible results for motivation. 

You can pay off each credit card balance starting with the smallest one and clear your debt one by one.

Unfortunately, you may end up spending months or years to repay the whole balance.

Not to mention, the interest keeps adding up over time. You will end up paying more than you owed originally. 

Steps to Success More Than Debt Strategies

While such strategies are useful to get you out of debt even with low income or bad credit, the best implementation will come from these fundamentally necessary steps:

1. Make Your Debt Dashboard

Keep all debts, bills, and expenses in one place, including rates of interest, due dates, and minimum payments. Help yourself organize yourself with free tools from the CFPB budget worksheet.

2. Break the Credit Card Cycle

Stop immediately using credit cards to pay for day-to-day expenses and switch over to cash or debit. Keep only one card in a safe place for real emergencies with a clear definition of what constitutes an actual emergency.

3. Identify substitutes for Emergency Funds

Replace over-reliance on credit cards for those surprise expenses with finding and engaging with local assistance programs, governmental benefits, and community resources to gain access to emergency support.

4. Build a Credible Budget

Observe the 50/30/20 principle: dedicate 50% of your current income towards necessities, 30% for repaying debts, and 20% for savings-to-do-applications while adjusting respective percentages according to your individual case and needs.

5. Track & Tweak your Plan

Schedule monthly financial check-ins to track your progress, celebrate small wins, and adjust your strategy based on changing circumstances like income changes or inflation impacts.

Conclusion

Getting out of credit card debt can be accomplished, even with a low credit score or limited income.

What is important to remember is that even though strategies like debt consolidation provide structured paths to financial freedom, ultimate success hinges on developing better money habits and informed decision-making.

Remember, one step can bring you to a life without debt. To work with a certified financial counselor or to work alone, the key is to be consistent and committed.

Connect today with free credit counseling services through NFCC and start right now on your path to living debt-free.

Author Bio: 

Attorney Loretta Kilday has over 36 years of litigation and transactional experience, specializing in business, collection, and family law. She frequently writes on various financial and legal matters. She is a graduate of DePaul University with a Juris Doctor degree and a spokesperson for Debt Consolidation Care (DebtCC) online debt relief forum. Please connect with her on LinkedIn for further information.

Tags: bad credit, Balancing Transfer, Credit card debt, Debt consolidation, Low Income

Category: Debt