Almost everyone has their share of debts. In fact, credit card debts are one of the most common financial hurdles for the average American household. Unfortunately, not everyone can clear debts without having any major problems because it’s these financial difficulties that landed them in debt in the first place.
If you're looking for a solution to your debt problems, you'll be glad to know that you have a few effective options at your disposal. However, you need to understand how each option works in order to find out if you're picking something that would best suit your situation.
Debt consolidation works in a pretty straightforward manner. This method includes accounting for all your existing loans, combining the total cost, and taking out a debt consolidation loan big enough to pay off all your existing loans. Once those are paid, you can focus on paying the single consolidation loan without worrying about which one to prioritize.
There's a catch though, and it's a big one: most of the time, the interest for a debt consolidation loan is relatively high. Sure, it will be easier to manage, but you're still just replacing your old loans with a single one. There's also the fact that the credit card accounts that you just finished paying will still be active, so you'll have to close them manually if you don't want to incur further fees and new debts. While debt consolidation does not completely relieve you of your debt, it is a good option if you're more concerned about having too many accounts to handle.
We all know how difficult it is to manage debts, especially if you have to deal with multiple accounts. If the financial pressure is too much, you have the option of getting someone to help you keep track and organize your accounts. Debt management companies will lend their skills and experience so you can find a way to pay off your debts in the most efficient way possible.
One thing you have to keep in mind when dealing with debt management is that the help doesn't come free. You're still going to have to pay the company because all the help you're getting is part of the service package. Furthermore, debt management doesn't guarantee that you will clear your debt – you'll just have better chances of doing so.
Many people would argue that declaring bankruptcy should never be listed as one of the best options for dealing with debt, but for some people, it might be the thing they need. Bankruptcy effectively wipes your debt from all accounts, which means it can and will get rid of your debt if the process goes on without a hitch. If you absolutely have no options for settling your debt, this is the best – and most likely, only – debt solution.
There's a big reason why bankruptcy should only be considered the best option in the most extreme cases. Bankruptcy gets rid of your debts, but not without a trace. The bankruptcy will reflect on your credit record for the years ahead, making applications for mortgages and even opening credit card accounts quite the hassle. It's not a quick and easy ticket out of debt because you will still have to deal with the consequences.
Debt Relief and Settlement
Debt relief and settlement programs put you under the guidance of debt counselors like with debt management, but with a few key differences. First, a debt relief program actively works at getting you out of debt and not just managing it. Second, the counselors have a more hands-on role when it comes to helping you get out of debt. Your chosen debt relief company will take on the role of a mediator between you and your creditors. The debt professional assigned to you will negotiate with your creditors to lower the amount of the debt in exchange for a lump sum payment.
Out of these debt solutions, debt settlement can be considered the best debt solution because it's the only option that gives you the chance to actually reduce the debt you have to pay. If you are considering bankruptcy definitely opt for debt settlement first it will help recover the health of your credit faster. Furthermore, many debt relief programs do not ask for payment until the debt has been settled.
There are many other things that you can try out to help increase your chances of getting out of debt, but if you're completely lost at where to begin, consider these debt options and see which one will work out best for you.
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