Taking inventory of your financial habits is always a good thing, but some holes are too deep to climb out of on your own. If you’re in terrible debt, you might not be able to get it under control simply by cutting spending and reducing your expenses. When debt gets bad enough, the interest alone can bury a person. Having a plan to get out of debt is crucial.
Options to Reduce Debt: Making the Process Manageable
- Negotiating Your Interest Rates
Some credit companies will be willing to negotiate for a different interest rate. Depending on your situation, lowering your interest rate might provide enough relief to let you get back on track. This isn’t always possible in every case, however. If you have an overall poor credit history and have missed payments in the past, your relationship with the creditors might not be positive enough for them to end up reducing your interest rate.
- Debt Management
One of the biggest benefits of choosing a debt management company is that it won’t negatively affect your credit. If anything, it will help improve your score as you work through your financial difficulties. These companies have the primary goal of making your debt situation more manageable by negotiating with creditors and coming up with a payment plan that works with your budget.
- Debt Consolidation or Transferring Balance
If you have more than one source of debt, it can benefit you to consolidate it into one monthly payment. This is both easier to keep track of and will help reduce what you owe by applying the interest to only one account. One way of doing this is by transferring all your various debts onto one low-interest credit card. Another is by taking out a debt-consolidation loan. The benefit of choosing a loan is that the interest rates might be lower than you can get with a credit card. However, you often need a good credit score to qualify for a loan, so if you’ve been struggling with debt for some time, this might not be the best option for you.
- Debt Settlement
Debt settlement is an option that allows you to pay off a portion of the debt, usually in a lump sum, to settle the entire debt. Creditors are sometimes willing to accept a portion of what’s owed rather than battling with someone indefinitely to get the debt paid off.
Debt settlement can be done on your own or through a third-party company that will negotiate the settlement for you. Unless you’re a real go getter and feel confident about haggling with creditors, going with a settlement company is probably your best bet. Most programs from third-party companies will request that you transfer a certain amount of money every month into an account to put toward the settlement. You’ll also be instructed to stop making payments to the creditors while the settlement company works out your deal.
A couple of things to consider about debt settlement:
- It will have a negative effect on your credit score.
- Creditors will usually not allow you to settle unless they see you have explored all other options, including debt-management programs.
If you would like more information about the various options for credit card debt relief, please contact us today.