No one plans to build up more debt than they can comfortably handle. If anything, most people start out with using a small form of credit in order to build their overall credit profile. There are many reasons consumers attempt to build credit profiles, usually with the hope of one day having enough credit, as well as a positive credit rating, to make getting approved for a loan easy. The problem is that over time, it becomes very easy to add more accounts. Before you know it, the debt is more than you can handle, especially if you go through a job loss, major medical event, or reduced hours at work. It’s important to be aware of your options before you make a decision regarding how you will handle your debt.
Debt consolidation involves combining all your debts into one. Normally, you would get a debt consolidation loan to combine and pay off the debts. Then, you make one monthly payment on the consolidation instead of multiple payments on multiple debts. However, debt consolidation is often ineffective simply because consumers who aren’t able to make their payments, struggle even when the debts are consolidated.
A debt settlement allows you to pay off a fraction of what you owe on the debt. If you only have a few accounts, this can be an efficient way to pay off your debts and start rebuilding your credit. The only problem is, if it isn’t done correctly, your credit report may reflect that you settled the account instead of paying it off in full. It’s also important to be extremely cautious when dealing with debt settlement companies because of past issues with deceptive practices.
Credit counseling helps you understand exactly how credit and credit reports work. This information allows you to make more effective decisions about your debt and how to manage it. Through credit counseling, you can learn how to negotiate debt settlements and avoid getting yourself into the same situation again. You may even learn that bankruptcy is the best option for you. Furthermore, after bankruptcy, many consumers find that credit counseling helps to maintain a good credit rating and keep their finances in order.
Believe it or not, you can negotiate with your creditors. As long as you are willing to make payments or pay off, at least, part of the debt, they might waive late fees and interest. This method can be time-consuming, but effective. Many times, creditors will also agree on a smaller balance. However, although you may be able to handle debt negotiation on your own, it’s often best to consult a debt lawyer. Sometimes your attorney can get the creditor to agree to better terms.
If none of these seem to be a good fit for you, bankruptcy might be your best choice. Contact us to find out which solution is best for your individual circumstances.
Have you tried debt negotiation or debt settlement? Share your experience with any bankruptcy alternatives in the comments below.