debt relief options

The best things in life are free…but we need money to live in today’s society. Aside from those who are doing the Thoreau thing (in which case we applaud you), the rest of us need cash. Or at least credit.

Unfortunately for anyone who’s taken liberties with credit, it eventually catches up to you. Being in debt can feel all-encompassing. It can cause stress, make marriages fall apart and generally make you unhappy.

Debt can feel like it’s swallowing you whole.

But you don’t have to let it control you or ruin your life. If you’ve found yourself in trouble take back control of your finances (and your life) today.

Here are five debt relief options that will help you get back on track.

1. Consolidation

Debt consolidation entails rolling up all of your debt into a single monthly payment and is a good option for those with high credit card debt. It could also lower your monthly payment to make it more affordable.

One form of debt consolidation gives you the option to transfer the balance of your credit cards onto a balance transfer card. You would then pay down the debt in a single and often lower monthly payment.

Another option for debt relief is to get a consolidation loan which you would use to pay off your debt.  You would then be responsible for paying off the loan. This is another good option for those wanting to lower their monthly payments, or even just to have them all coming from one source.

You may be a good candidate for debt consolidation if you have good credit (so you can get a lower interest rate), low debt and consistent income.

Conversely, if you know you’ll have trouble paying off the loan, you should consider some of the other options below.

2. Deferment

You can get debt relief today by deferring your debt. This is a temporary fix, but it may be what you need to get back on track.  Many lenders will be willing to defer your bills for a month or two. When this happens the deferred payments are added to the end of the loan. So it’s still your responsibility to pay them, but you’ll have more time.   

Many auto loan lenders are able to do this for a 30 or 60 day period. Student loans are another debt that is commonly deferred.

Deferment benefits you by giving you time to get back on track and make your next scheduled payment, without having to play catch up or get a late payment reported to the credit bureaus.  

This is a good option for those facing a temporary hardship, who will be able to pick themselves up before the deferment period is over and get back to paying their debt on time.

3. Refinance

If you find your bills are too high to keep up with, refinancing may be the solution. Refinancing replaces your current debt obligation with another obligation but on different, more favorable terms.

You could refinance to get a better interest rate and lower your monthly payments. It’s also available for different types of debt like auto loans, mortgages and even student loans.  Refinancing pays off your current loan and allows you to pay off the replacement loan.

Getting a new loan with more favorable terms will help you pay off your debt less painfully and may also give you some free cash to spare each month. This is another good option for debt reduction since it won’t damage your credit scores.

4. Debt Settlement

Debt settlement is an option in which you and the creditor come up with an agreed upon amount that the creditor will accept in place of full payment. It’s important to get any offers of debt settlement in writing.

This way you have proof of an agreement. This helps in the event that the debt was on your credit reports and you need proof that the creditor agreed to accept a lesser amount as payment to settle the debt.  

This website has some great information on debt relief programs, like settlement, and can help you get debt relief.  

5. Bankruptcy

If none of the above options will work and you can’t pay your debts because you simply don’t have the means to, bankruptcy is a way out. While it should be a last resort, it is certainly better than defaulting and having those debts continue to haunt you.

Chapter 7 liquidation is one of the more common forms of bankruptcy and will erase medical and credit card debt as well as unsecured loans.  What it won’t do is erase student loans or tax debt.  

Bankruptcy is also going to stay on your credit report for 10 years and is highly damaging to your credit score. Before filing for bankruptcy it’s essential to consider the impact it will continue to have, particularly when it comes to applying for new credit or a new auto loan and even mortgage in the future.

Once You’ve Tried Debt Relief Options: Stay the Course

These are some of the best debt relief options to get you back on your feet. Once you’re debt-free, discipline and tightening your budget is going to prevent you from getting swallowed by debt again so you don’t have to go through these steps again.

To avoid getting back in debt avoid maxing out credit cards or opening too many lines of credit.

These debt relief options will help you take back control of your finances.

If you found yourself in trouble with debt, chances are your credit score has suffered as well. Once you have a clean slate the best course of action to bring your score back up is to not overextend your credit cards, and to pay them off in full each month. If you can’t pay in full, keep your utilization below 30%.

You’ll also want to pay your bills on time, every time. A single late payment will reduce your scores as much as 100 points.

Don’t take on more debt than you can handle, make a budget and stick to it. Then remind yourself of all the hard work you did to make it to where you are now and pat yourself on the back.   

Check out more of our life hacks and advice and keep living your best life.  

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