With the decline of the current economy, many people find themselves struggling to stay afloat during these tough times. Individuals find that they have mountains of debt with no end in sight, and they have debt collectors calling them at all hours of the day. Medical bills, student loans, the loss of a job, or just overspending could contribute to the financial crisis. Things just keep getting worse and worse. It can be devastating for a person to face. However, financial debt can be conquered. Here are some realistic choices to consider to help with debt relief:
What Are My Debt Relief Options?
Sometimes people have so much credit card debt that they cannot even make the minimum payments. The credit cards are maxed out and the situation seems completely out of control. In this case, debt negotiation is one option to seriously consider. Individuals negotiate with their creditors to obtain lower payments, lower interest rates, and reduced fees, making it more manageable for them. Sometimes the negotiator can reduce the debt up to 50%. Most of the time, before creditors will negotiate, consumers will need to be more than 3 months delinquent on their accounts. However, while consumers are in debt negotiation, it can lower their credit score.
With debt consolidation, a person usually takes out one loan to pay for many others. People can usually secure a fixed loan at a lower interest rate. Consumers will take debts from credit cards, department store cards, and other secured debt and combine them so they are easier to manage. Sometimes companies charge a lot of money for this service so consumers need to make sure that this is cost effective.
Sometimes people are not organized enough to form a budget and stick to it. Therefore, they might consider a credit counseling company to help them get out of debt. Credit counselors can direct individuals on how to manage their money and create a budget so that they can become debt free. They will inquire as to what might be the source of the problem so they can develop an understanding on how to proceed. The counselor will show consumers how to acquire a personalized solution to solve their financial burdens.
Debt Management Plan
Another debt solution is a debt management plan. A debt management plan is not for everyone, but one’s credit counselor could suggest that they sign up for a debt management plan. A person gives the credit counseling company money each month in which they pay the unsecured debt. Individuals come up with a schedule that works best for them, and a creditor might agree to lower interest rates or some fees. A plan will entail that all monthly payments are paid on time, and while in the plan, consumers may be required not to apply for more credit.
Do It Yourself Approach
A person might decide to forgo all of the counselors and negotiators and just do it by themselves. They want to take control of the situation and budget their finances on their own. They can negotiate with creditors and pay off the highest interest rates first, or they might get another job to make some extra money. They also get the scissors and cut up the credit cards. In order to do this, a person needs to have a lot of self-discipline and control and stick with it until their financial burdens are lifted.
Chapter 7 Bankruptcy
This should be the last resort for a person to take. With bankruptcy, a consumer obtains an order from a court that says that they are not required to pay their debts. It is a very long and burdensome process. Bankruptcy will greatly affect a person’s credit, as it stays on the report for 10 years, and it can make it hard to buy a home, car, get insurance, and possibly even get a job. People need to consider this option long and hard because much of the time, the long-term consequences are not worth it and it is public record for anyone to view. However, if the financial situation is completely hopeless, it can allow a person to start over and rebuild their life.
Sometimes people do not want to believe that their debt is out of control. They are in denial and so the creditors keep calling. This option will result in more stress and anxiety and possibly even a lawsuit. It is advisable not to disregard the financial burdens because they will continue to pile up and only get worse.
Consumers who find themselves falling more and more behind on their debts need to take charge of the situation and find the help that they need. Consumers need to research the options and find the best solution for them so that they will become free from debt.