Debt relief can come in many forms. What it is to you depends on what your current financial situation is and how much spending discipline you have. If you have debt and are looking for a way out, it is important that you look at all your options. There are 4 different ways that you can approach your debt and as mentioned before, not all of them will work for you depending on how much debt you have, if you are past due and how much excess income, if any; you have to apply to pay off your accounts.
Pay your debts yourself-many people think this is the only way and it can be done. This plan takes a lot of discipline and not everyone has that. You have to make a detailed list of who you owe, how much, your monthly minimum payment and your interest rate. You make minimum payments on all accounts except the one with the lowest balance. On this account you pay as much as you are able. Once it is paid off, you do the same thing again. You should be putting all extra money to the account you are currently paying off. This will work best if you cut back on your expenses and increase your income. This method will keep your credit in tact and will teach you good money management.
Debt Counseling-this is a type of debt consolidation that is not a loan. Your interest rates will be reduced and possibly even eliminated. You will no longer be accessed late fees or overlimit fees. Your accounts will be closed and you will not be allowed to open new ones while you are enrolled in the debt management program. You make one monthly payment to the credit counseling organization and they disburse it to your creditors for payment of your accounts. This is not a good option if you are more than 3 months past due on your credit card accounts. This program should take no more than 5 years. If it does, you should consider another option. The impact on your credit will be minor.
Debt settlement-this is a program whereby a debt counselor negotiates a reduction on the balances of your debts. Your debts are reduced on average from 30-50% and as much as 85%. Debt settlement can save you a lot of money and can have you out of debt in 12-36 months, but this does not come without a price. It will have a negative impact on your credit. This is a good alternative to bankruptcy and works if you have debt over $10,000 and debt that is over 3 months past due.
Bankruptcy-this is an option that is reserved for when nothing else will work. It is not the free ride that it used to be and will be a reorganization of your debts. This can remain on your credit record for up to 10 years.
You do have options for debt relief. It is just a matter of deciding which option is going to work best for your financial situation and discipline.
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