The Four Main Debt Relief Solutions |
By Ashley Russell on October 12, 2011
.jpg.aspx) There are many ways for individuals to get out of debt, and with many of Americans losing their jobs, debt solutions are becoming much harder to find. Here are the main four types of debt solutions that can help individuals with their debt problems.
1. Credit Counseling
Credit counseling is usually a program that individuals can enroll in for debt management plans. This often allows individuals to qualify for concession rates from creditors. This means that they may offer them lower interest rates on their debts because they are taking steps to find a way to pay back their debts and stop abusing their credit. Credit counseling involves creating a plan on not only how to repay debt but also future financial decisions. Credit Counseling usually means that individuals repay 100% of their debt, or at least are expected to, and it usually takes several years to complete.
2. Debt Settlement
Debt settlement refers to when an individual signs up for a company to negotiate with creditors to reduce or settle their debts for less than is initially owed. This is often good for individuals who have no way to afford their monthly payments for their debts. One problem with these programs is that part of the process is not paying monthly payments until the end of the negotiating process. This means that the individual’s credit scores will be harmed during this process. There is not guarantee that this process works, it requires that creditors are willing to negotiate over an individual’s debts.
3. Mortgage refinance
One way to address overall debt problems is to address a usually large amount of individuals’ debt, their home mortgage. Although this is not usually considered "bad" debt, or debt that needs to be completely eliminated, refinancing can give individuals lower monthly payments that will allow them to have more disposable income to use to reduce and pay off their other debts. Paying more than the required minimum payment on other debts with this extra income can more quickly reduce their debts.
4. Bankruptcy
Bankruptcy should be individuals’ last resort because of the severity of the consequences it entails. Bankruptcy can stay on credit reports for up to 10 years for individuals, making it nearly impossible to receive credit during their time. It does, however, erase nearly all of individual’s debt, but involves selling off many assets to help pay back creditors.
Before an individual decides on a course of action, they should figure out what is best for their situation. There are many options to alleviate debt; it just depends on each different situation. |
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