How To Get Out of Debt

How To Get Out of Debt

Debt Relief Resources

Are you struggling with debt? If so, you are not alone. Around 80% of Americans have debt, and many of them cannot see a way out of it. If you are already struggling to make ends meet, debt can seem like an overwhelming problem that just keeps getting bigger no matter what you do.

However, there are ways to get out of a cycle of debt and take control of your finances again. The following paragraphs discuss some of the most popular debt relief strategies that consumers use, along with their benefits and drawbacks. Read on to learn what you can do about your debt.

Debt Relief Programs: One of the best ways to start getting a handle on your debt is to make sure you understand it. Sometimes we get in debt because of factors beyond our control, like accidents or medical bills. For many people, however, overwhelming debt can be the result of bad spending habits or a lack of financial literacy.

No matter which group you fall into, developing a debt relief program with the help of a credit counselor or another accredited professional is a great first step. Many credit counseling companies are nonprofits that offer debt relief solutions tailored to your needs. An expert will explain your options and help you develop a budget. If necessary, they may also help you negotiate modified payment plans with your creditors.

Debt Consolidation: Debt consolidation is when you take out a loan to pay multiple smaller loans. This essentially consolidates all your loans and usually leaves you paying less per month. If you are struggling with monthly payments for your loans and need some breathing room, consolidating your loans may be worth looking into.

Just keep in mind that the reason your consolidated loan has lower monthly payments is because the loan is spread out over a longer period of time. While this may be a helpful way to stay on top of your monthly payments and might even improve your credit over the long-run, you will have ended up paying more overall once you become debt-free.

Debt Settlement: Although it is often confused with debt consolidation, debt settlement is a more aggressive strategy and involves significantly more risk. Settling your debt involves hiring a company to negotiate with your creditors on your behalf. In order to have better leverage over your creditors, the settlement company asks that you stop paying your credit card debts. The theory is that after a few months of missed payments, your creditors will agree to accept a lump sum payment rather than no payment at all.

This is a tricky strategy because there is no guarantee that it will work. Some creditors do not negotiate with debt settlement companies and would rather hire a collection agency to intimidate or bully you into paying your debt. Additionally, discontinuing payments on your credit accounts will lower your credit score.

Finally, keep in mind that if the debt settlement works, you may still have to pay around 25% of what you owe in a lump sum, which may be hard to do if your financial situation is making it hard for you to make any payments at all on your debts.

By Admin