Are you drowning in debt and in dire need of saving? You should know that you are not alone, as many people have been in a similar situation. There are legal debt relief options that have worked for millions of people that can help you minimize the burden of accumulated debts.
It is important that you know and understand the details of each debt relief option so that you can make the best choice for your specific situation.
Here are seven ways you can handle your debt problems:
Continue making minimum payments on your credit account
As long as you are making the lowest amount of payments required by your financial institution, you will not accrue late fees and will not be reported for delinquency to the credit bureaus. This may seem like a good decision as it helps keep you afloat.
However, you aren’t paying attention to the outstanding debts that accumulate over time. Making minimum payments will let your debt grow significantly due to the high-interest rates.
The only benefit of this strategy is that it keeps you afloat, but it does nothing to improve the situation. A significant portion of what you pay is going towards the interest of your debt. To put it plainly, this method works best for the lender, and not so much for you. While they earn several billions of dollars per year from interest alone, your debt rate continues to spike.
Also, the minimum payment which may be less than $100 per month, may increase over time, and the minimum payment will amount to a lot more. After calculating the total payoff on your unsecured debts, you may find that it exceeds the loan amount by up to 100%.
Keep hoping for a miracle, like winning a huge sum of money.
You cannot sit back and fold your arms, waiting for a miracle to happen, like winning the lottery or inheriting a relative’s estate. This is only a delay tactic to keep hiding from facing your problems. The best results can only be achieved by facing your problems head-on and working to rectify the situation.
Studies and reports have shown that the chances of winning the lottery are almost nonexistent as you only have about a 0.0000001% chance of ever getting it. You have a significantly higher chance of resolving your problem by employing any of the debt relief options. And, if by sheer luck you become a millionaire overnight, do you have adequate information to know the best option for your situation?
Debt management is a type of non-profit debt consolidation program. It is also known as a credit counseling program, or non-profit credit counseling program. It is a popular recommendation for those that are finding it difficult to keep up with their monthly payments. It is a creditor-sponsored program that can serve as an effective solution to repaying your loans.
Qualifying for this debt relief program does not excuse you from making any payments, but your charge may be significantly reduced down to a 2% minimum payment per month. Note that you will be charged a fee for credit counseling, which may be as high as $79 per month. You must make one-time payments to your lender each month. A few years earlier, financial institutions may charge as low as 0%, but in recent times creditors have become unwavering to lower the rates. Some refuse to reduce the rates, and some do not offer non-profit debt consolidation plans as an option.
With this option, you cannot afford to miss any of the payments as you may be expelled from the program.
Filing bankruptcy is one of the popular options to get out of tight financial situations. If you are you are contemplating this option, you should know all the facts.
It is best to consult a legal advisor to give you updated information about the process of bankruptcy. There are two types of bankruptcy you can choose between. They are Chapter 7 bankruptcy and Chapter 13. There are several factors to consider to know which type is best for you, such as income, assets, debts, and financial goals.
If you are choosing Chapter 7 Bankruptcy, the main requirement is to have zero disposable income. After you have passed this requirement, the court also has to determine whether the assets you have are exempt or non-exempt.
Chapter 13 bankruptcy is a form of repayment plan. It is for those who aren’t completely broke and can afford to repay a portion of their loans. The court considers your ability to pay back the loan and several other factors before you can qualify to file.
Unsecured Debt Consolidation Loan
An unsecured loan is without collateral. A collateral is a property that is tied to the agreement, such that if you default in the terms, its ownership will transfer to the creditor. Most lenders require collateral before you can qualify for a loan. However, there are some types of debts that don’t require such, they include credit cards, payday loans, and personal loans. These are the most common form of debt and they present the biggest problem to consumers.
These types of loans have alarmingly high rates of up to 23% or more, and you may also be charged loan origination fees. The creditors are the ones in luck with this system because when you add all the charges, you will end up repaying more than what was borrowed. You’re in a worse situation if you have multiple credit card debts, and loans as you will find it very difficult to pay back.
This is because making monthly payments to several creditors increases your chance of missing payments. Late payments may go on your record, which can make lenders see you as a high-risk consumer and be less inclined to grant you new loans.
Secured Debt Consolidation Loan
A secured debt consolidation loan is the opposite of an unsecured loan, which means that it comes with collateral. You need to pledge an asset like a vehicle, land, or property as security to the loan before the lender agrees to the transaction. Most creditors see this as the best way to guarantee your repayment. Usually, the asset must be worth the amount of the loan so that it is enough to eliminate your debts, should you default in paying. This debt relief option is another high-risk one as the creditor stands to gain a lot more than you do.
Debt settlement is the final option we’re treating. It is also known as credit settlement or debt negotiation. This method is designed to help you cut down on costs as much as you can so that you can save a lot more and quickly. There are several factors to consider before you can qualify for a settlement, such as the age of the loan, the type of loan, your income, state of residence, and age.
Are you overwhelmed and unable to decide on the best option for your specific situation? You can hire professionals to assess your financial situation and recommend the most effective and painless way to help you save as much money as possible, as fast as possible.
Sources – Become Debt free