Getting out of Debt

Debt consolidation can help you find relief from your credit card debts by reducing your interest rates and easing the monthly burden of your debts. However, there are a number of options available when you decide to consolidate your debts. Choosing the right option can mean the difference between putting your finances back on course and causing an even bigger problem for your finances if you choose the wrong debt consolidation option for your needs.

Here are some of the options you have when trying to get out of debt:

Debt Consolidation Loans
This is a great option since ideally you can pay off all your debts and keep only one loan with a low interest rate. By combining all of your smaller debts into one, you may be able to make a smaller monthly payment. The problem is that like any loan, you need to have good credit in other to obtain an unsecured debt consolidation loan at the right interest rate. In most cases, people that are having trouble with debt only take action after falling behind on their payments; by that time, your credit might not be good enough to get an unsecured debt consolidation loan at the right terms.
Debt Management Programs
These programs help you consolidated all your bills into one monthly payment like the loan described above. However, you send the payment to a credit counseling agency and they negotiate and distribute the money between your creditors on your behalf. The agency negotiates with the credit card companies to reduce your interest rates and stop all fees. This makes your monthly payment go down so you can get out of debt in a fraction of the time than you could on your own.
Debt Settlement programs
Like the name suggests, these programs try to settle your debt for a percentage of the total balance. These kinds of programs offer a lower monthly payment than a debt management program, but also have a negative effect on your credit. However, in the right situation, settling your debts for less than the total amount owed might be the right way to solve your debt problems.
Bankruptcy
Even with the Bankruptcy Law passed a few years back, the people that have a real need to file can still do it. Bankruptcy will instantly eliminate your debts, but at the same time, destroy your credit. Depending on the type of filing, bankruptcy can stay in your credit report for as much as 10 years.

If you’re not sure which debt consolidation option is right for you, why not let an expert look at your finances and assess your options for free? Our certified credit counselors can identify the right debt solution for your unique financial situation. Call 800-251-7196 to speak with a certified credit counselor or take our Free Debt Analysis and a counselor will be in touch soon.

Posted in: Financial Counseling