Being responsible with money doesn’t come naturally to everyone. Mistakes are made, especially early on in life, like missed or late payments, overextending yourself when it comes to everyday or major purchases on credit, and ignoring missteps to the point they harm your credit.
When debt becomes too much to handle, the idea of dealing with it is likely to be overwhelming. However, there are several options for debt relief that can lend a necessary hand in correcting the course of your financial life.
1. Debt Consolidation
When you find yourself drowning in high-interest-rate debt, like credit cards or personal loans, debt consolidation may be a viable solution to get your financial picture back under your control. With debt consolidation, you take out a new loan to pay off all outstanding debts, or as many as you are able. The benefits of taking this route toward debt relief include fixed repayment terms that require a single monthly payment and a steady interest rate.
Instead of paying for multiple debts each month with varied costs, you can simply make one payment to your new consolidation loan. Debt consolidation does require a relatively strong credit history and the willpower to stop spending on your newly zeroed-out credit cards.
2. Debt Settlement
The process of debt settlement may also be an option for debt relief. Also referred to as debt negotiation or resolution, settling debt requires you or a professional like CuraDebt or National Debt Relief to negotiate a single, lump-sum payment with each of your creditors. Negotiating debt down through debt settlement allows you to potentially reduce the total amount owed and create a plan for exhausting the debt fully in a shorter period of time.
Hiring a professional to work with you on settling outstanding debts is often the best choice, given their expertise and ability to speak directly to creditors on your behalf. Working with a debt settlement company or professional often costs money, so it is important to weigh the pros and cons of this option along with your alternatives prior to taking this step.
3. Debt Management Plans
Any debts that are unsecured, meaning they are not attached to assets like your vehicle or your home, may be eligible for a debt management plan. Under this type of debt relief, you or a professional like Debt.com works with your creditors to develop a repayment plan which typically includes a reduction of interest charges during the time repayment is taking place. While you still agree to repay your debts in full, the reprieve from interest works to lower the total cost of debt, making the payments easier to manage.
Unlike debt settlement which requires you to be behind on some or all of your payment obligations, debt management plans allow you to maintain on-time payments without dinging your credit. Working with a professional for debt management plans often carries a fee, so it is important to understand the total cost of this option.
4. Credit Counseling
A free option for creating a path toward debt relief may be credit counseling. With the help of a certified credit counselor, this service offers help with reviewing your financial picture as it relates to your current debts and income. You are able to then develop a budget based on what you earn and what you owe to put toward getting out of debt.
Several organizations offer credit counseling at no cost, and the process is ongoing to truly help you get back on track with your financial responsibilities. It is necessary to do your research on credit counseling organizations to ensure you’re working with a real certified counselor.
5. Bankruptcy
The last resort in finding debt relief is filing bankruptcy under either Chapter 7 or Chapter 13. With Chapter 7 bankruptcy, you work with the courts to absolve yourself of all eligible debts, wiping the slate clean; under Chapter 13 bankruptcy, you create a years-long repayment plan that eases your total debt obligation. Both bankruptcy options are worked out with the help of an experienced attorney and may take a substantial amount of time to complete, depending on the complexity of your situation.
Bankruptcy does remain as a black mark on your credit history for up to 10 years, making it an option for those who are in serious delinquency or see no other option in the alternatives listed above.
Final Thoughts on Getting Relief from Substantial Debt
Debt does not have to consume your life to the point your entire paycheck is going toward repaying creditors. Instead, you can utilize one of the debt relief options listed here to ease the burden your debt payments have on your income each month.
Before taking the step toward debt relief, take the time to reflect on your financial history, and commit to doing things differently moving forward. The only way any of these options will work to your benefit is if you’ve dedicated yourself to a life of financial responsibility for the long haul.
