If you want to attain financial stability, it does not happen overnight. Sooner you start the process of getting out of debt, the better it is. It will not only help your credit score to improve over time but your chances of getting credit in future also gets multiplied. With the increase in the number of credit card holders, debt help programs have gained wide popularity. Some of the popular debt solutions are given below.
1. Debt settlement
Debt settlement (debt negotiation) is the process in which you are allowed to pay less as compared to what you actually owe. There are several debt settlement companies helping debtors with their debt problems. These companies usually charge upfront fees for helping you out. They work for you and negotiate with the creditors or the collection agencies to allow you to pay less. You do not make payments to the creditors and pay the same amount to a trust account. When approximately 50% of the outstanding balance has been accumulated, the settlement company pays the money to the creditors. Approximately 40% to 60% of the outstanding debt can be reduced.
2. Debt consolidation
In debt consolidation, you compile all your debts together into one account. Debt consolidation companies will help you to negotiate with the lenders and the collection agencies. Debt consolidation has many benefits.
3. Debt Management Program (DMP)
In debt management program, you can avail a lower APR. Lower APR means you can make lower payments too. Usually a credit counseling firm helps you to become debt free. Credit card bills, medical bills etc are covered by a DMP.
4. Self Repayment Plan
If you are confident that you can handle your own debts, you can go for the self repayment plan. You budget your expenses and try to curb your unnecessary expenses. Make a list of all your debts and calculate how much you can pay towards monthly payments. Negotiate with the creditors to work out a restructured repayment plan.
Enrolling for any debt help program will enable you to enjoy certain benefits. Some of them are as follows-
Lowered rate of interest
- Lower monthly payments
- You don’t get harassing calls from collection agencies.
- Your credit score improves over time
- You enjoy the facility of making payments as per your convenience
5. Bankruptcy
Bankruptcy should be your last option. However, filing for bankruptcy gives you an opportunity to manage your finances anew. Depending on your current financial situation you can select the type of bankruptcy that you should opt for.
About the Author:
This article was written by Robin Williams.
2 Comments
While interest rates at the moment are at some of the lowest to be seen in a long time many are still struggling to continue meeting their mortgage and other debts. While those who took the tracker option are fairing well and enjoying around 11% more income, those who opted for the fixed rate are losing out and are looking to long term ways of clearing their unsecured debts, at least. If you are one of these then contact a debt specialist and run your debt questions by them.