For many, debt is a part of life. But, if you’re struggling to make ends meet you might want to consider looking for help. It can be tough when you feel like you’re struggling with debt all on your own. In reality, thousands of people have had trouble with debt before and you have many options to help get back on your feet. The first step to getting help is accepting the debt relief options that are available.

The most common debt relief options are debt consolidation, debt management, debt settlement, and finally, bankruptcy. Understanding the differences between these will help you make the right choice for you.

1. Debt Consolidation

Consolidation loans are usually taken as a way to tackle high-interest debt. Here, you take a loan to pay off your high interest debt with a lower interest rate. There are two types of consolidation loans: secured and unsecured. For an unsecured loan, you don’t need to put up any type of collateral to be approved. Because of this, unsecured loans are usually more difficult to obtain because a higher credit score is necessary.

In a secured debt consolidation loan, usually your house is put up as collateral for your loan. While it is unlikely that you would lose your house if you fail to make payments, this can happen, so proceed with caution.

2. Debt Management

If you can’t qualify for a consolidation loan, a debt management program may be another good option. With this plan, you’ll have the support of a credit counsellor to help you through the process of getting your debt under control. Usually a debt management program aims to pay off your debt within 3-5 years using sound budgeting and money management principles.

You’ll save money with lower interest rates, and make one monthly payment rather than several. These programs are hard work, but very satisfying to complete.

3. Debt Settlement

Settlement is an option for those who have large amounts of debt without enough income to pay their debts in full. Here, you’ll also work with a debt counsellor who will contact your creditors and negotiate an agreement for debt reduction.

You’ll only have to pay a percentage of your debt, but you won’t get a reduced interest rate. You’ll likely make one large payment or adhere to a payment plan arranged by your counsellor. Settlement should only be considered for the most dire debt situations.

4. Bankruptcy

Finally, declaring bankruptcy is the most extreme debt relief option and should only be considered in extreme cases. Bankruptcy is a legal process overseen by legislation. If bankruptcy is your only option, be prepared to surrender your assets and take a hit to your credit score. You may have trouble being approved for new credit after bankruptcy.

Choosing the right debt relief option can be a difficult decision to make. Learning as much as you can will help you make sense of the options available and make the process run that much smoother. Then, you’ll be one step closer to being debt-free.

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