For consumers who have accumulated debt, researching potential solutions is the first step in the right direction. While seeking out a debt relief option may not be the ideal situation in the mind of the average consumer, it may very well be entirely necessary in order to achieve financial freedom.
Stop Debt in Its Tracks
In order to reduce the likelihood of making your financial situation worse, the first step is to make sure you aren’t accumulating additional debt. What does this mean? This means that you should stop using your credit cards, stop allowing your overdrafts to increase, and to stop receiving personal loans from family and friends that will only increase the stress you feel from these obligations.
Analysis
First, calculate what your income to cost ratio is for one week. If you are spending more money than you earn, you will have to adjust your spending habits to a more appropriate level. In addition, generate ways that you can save money each week, as well as ways you can cut unnecessary costs from your budget to improve your situation. In some instances, people have to sell their cars, move into more affordable housing, and make a lot of drastic decisions in order to get there selves out of debt. While this may be a potential solution, the important thing is to realize that in the end you still must have enough money left over to live off of and pay back your outstanding debts. Once you have developed a strategy to make the books balance, you can take the next step and begin to assess what debt relief options are available to you.
Consult a Specialist
When you are trying to clear your debt, there is nothing more important than seeking professional advice. While you may not be able to afford professional help, you will be surprised to know that there exist many debt consolidation organizations that offer free consultations.
A consultant will be able to offer you suggestions on your best debt relief options considering your circumstances. Debt settlement companies can settle credit card debt on your behalf to reduce the total debt that you owe. In addition, these companies offer improved repayment terms and other solutions to accommodate your situation financially. Professionals working for these organizations are also familiar with state debtor laws, ensuring that their clients are not mistreated or taken advantage of in any sense legally.
Bankruptcy
Bankruptcy should be the last option for consumers seeking debt relief. The consequences on your credit report are catastrophic, not to mention the strain that bankruptcy puts on you and your family. While some people view bankruptcy as a chance to “start with a clean slate” the majority of consumers are not informed of the consequences. Typically, you will have to turn over all your non exempt property, in many cases this includes your home and any vehicles you may own. In addition, filing Chapter 7 or 13 bankruptcies stays on your credit report for 7-10 years and on your public records for 20 years. As a result, receiving future loans and getting better jobs becomes extremely difficult as you are considered unreliable in the eyes of potential lenders and employers
Got a Question? Ask.
Ask the community a question about this article:
Frequently Asked Questions
Hello David. Three years ago (in better economic ...
By: Deborah | 19-08-2008
Hello David. Three years ago (in better economic times), my son shopped around for the best mortgage deal before purchasing his condo. He first went to CountryWide Mtg. who ran his credit scores and approved him, but he thought he could get a better rate. He next went to a bank. The same scenario ensued. In the meantime, the local credit union was offering an enticing rate, so for the third time he went through the process. At this point the credit union informed him that since his credit scores had been pulled twice already that his scores were dropped substantially. He ended up paying points to get a reasonable rate. My question is, If banks and mortgage institutions have to run your numbers first in order to come up with a rate, how can they penalize you for it and shouldn't they be required to tell you beforehand that it will affect your score and hence, your rate? Thank you. Deborah
What lender offers ITIN loans
By: Jess | 18-08-2008
I am a mortgage broker. Does anyone know what lenders are currently offering ITIN loans.
Vacation Homes
By: Sandra | 16-08-2008
Who is the best source for getting a low fee and low down payment mortgage for a vacation home?
jgaylesan@aol.com
Asking for a discount rate
By: Steven S | 16-08-2008
Dave, My wife and I are purchasing a 2nd home and I was wondering since both my wife and myself have credit scores in the 800+ range, am I out of line thinking I should be able to ask my lender for a better rate on mortage interest (thinking about 1/2% to 1/4% discount). I will be using purchasing this home with a VA home loan.
Government grants for home owners
By: ebere | 15-08-2008
How can I apply for the money the congress passed to help people who are behind their mortgage payments and, who have the adjustable rate?
Upside Down with Three Mortgages
By: Dan | 15-08-2008
I have first, second and third mortgages on my home. The first and second are 30 year and the third is 15 year. My first is an ARM and the interest rates on the first and second are quite high. The third is only for $10,000 and has a low payment although the interest is high. The third puts me upside down on the value of my home versus its last appraisal. Is it possible to consolidate the first and second which is under the appraised value and leave the third complete out of the transaction?
Q&A Powered by:
More from Bobby Zangrilli
Using Consolidation Loans for Debt Relief
By: Bobby Zangrilli | 08/08/2007 | Debt Consolidation
In today's hectic life, it can often be difficult to stay on top of your monthly repayments. Credit card bills, utilities bills, the mortgage, student loans – they can all mount up, and if you miss a payment here and there, you could quickly find yourself with a mounting interest bill. Fortunately, most of us would benefit from the security of a consolidation loan, providing us with a considerably more manageable financial commitment. In this article, we'll look at how a consolidation loan ca
Debt Relief: Breaking Free
By: Bobby Zangrilli | 25/04/2007 | Finance
Debt relief is the partial or even total forgiveness of a debt; it also means eliminating debt or capping interest rates in certain cases. No matter what method you opt for, it is essential that you change your spending habits if you wish to fully recover from debt after being given debt relief.
Finance 
