Living with large sums of financial debt can be a stressful situation for any individual – especially when you owe more than your current income. Add the responsibilities of needing to provide for a family and getting out from under the crushing weight of your financial debts can seem nearly impossible. Thankfully, we know of a few effective solutions to paying off your debt faster and or more efficiently.
The truth is, we all have the power to take care of our financial debts when we are determined to improve our lives. While this is often the most difficult option, as it requires a large amount of self-discipline it is, it is manageable. Budgeting, making lifestyle changes and being cautious with spending is essential to resolving your debt without hiring an expert.
First, you need to know your debt to income ratio. This is how much you owe in total debt compared to your current income and ability to pay. It is important to know whom you owe, how much and when payment is due. You may also want to include the minimum payment amounts. We recommend organizing this information on a spreadsheet or with the help of our FREE Debt Calculator
Next, you want to begin contacting your creditors to give a better explanation of your current financial status. This means you will need documents and other ways to prove your financial hardship and inability to pay under the agreed-upon terms. This will requires endless determination and patience on your part as debt collectors are notorious for their harsh tactics.
If you can successfully relay your financial struggles to your creditors, there are four options you may want to discuss:
While each individual is encouraged to contact their lenders to explore their potential settlement options, it can become frustrating and time-consuming dealing with creditors. Fortunately, with the help of one of our skilled debt specialists, there are other options available to help you get back on track.
Debt Settlement, also known as Debt Negotiation is another debt relief solution that utilizes a debt specialist to help you generate news terms of payment, sometimes for less than what you originally owed
Debt Consolidation is another way of handling debt once and for all. This does not decrease the total amount you owe, but it can eliminate higher-interest rates on some of your unsecured debts by consolidating your accounts into one monthly payment. This is usually a great option you have the financial means to make larger or still qualify for a personal loan.
Declaring bankruptcy is also a form of debt consolidation, however, it is often considered a last resort when it comes to debt management. While it may seem like a fresh start, declaring bankruptcy can in fact wreak havoc on your credit report and financial approval ratings for years to come.
To qualify you must be able to prove without a doubt your inability to repay your debts at your current rate of income. You will be required to complete credit counseling and must file for bankruptcy within 15 days of completion. There are two types of bankruptcy:
Chapter 7 is when your assets are liquidated to satisfy the debt owed to the lenders. This often does not include your house, automobile or personal items unless they were purchased on a line of credit you are seeking to settle.
Chapter 13 is the reorganization of your finances in order to pay back most of your creditors in the form of consolidated payments.
Unfortunately, many American citizens struggle with debt, simply do not possess the time, skills or courage to negotiate with creditors. This is where the expertise and professionalism of credit specialists can lend a helping hand.
If you are not sure how to negotiate for the payment plan of your dreams, it may be time to contact any number of the free and lost cost credit counseling services available locally or online.
This will require you to spend a good amount of time on the phone going over your finances with a trained financial advisor. They will review your financial portfolio and credit report with you in order to make the best recommendations to assist will you during this financially difficult time.
Sometimes, they find you may qualify for a Debt Management Plan (DMP). This is where credit specialists may negotiate for longer payment terms or lower monthly payments. If all or most of your creditors agree to the new terms, you would be responsible for making a monthly payment to a credit counseling agency instead, who will in turn, distribute your payment to your lenders on your behalf. This allows you to focus on making payments and not dodging calls from harassing debt collectors.
The biggest downfall of Debt Management Programs is they can typically take up to 5 years to complete. Without being committed to making changes in your spending habits and ability to save, it can be all too easy to default on your new payment plan.