Debt Relief: 3 Painless Alternatives to Bankruptcy
If you’re in debt right now, you’re not alone. The economic downturn in the country has brought a lot of people into overwhelming debt that they have never before experienced. In any other situation, most of the people experiencing excessive debt right now would never have been in this position if it weren’t for the current economy, and those who are going through it range from people who were formerly very well off financially like doctors and lawyers (and even celebrities!) to those who have constantly struggled their whole lives. So if you have a debt problem, don’t feel bad. You’re in good company.
You may be thinking that bankruptcy can bring you debt relief, and it can. But before you jump into bankruptcy, which can ruin your credit for seven to 10 years, you should first be aware that there are alternatives that can help you and won’t do nearly as much damage to your future borrowing potential. Here are the top three alternatives to bankruptcy that can get you out of debt fast and more easily than you may have thought possible.
1. Credit card debt consolidation–With this type of debt management plan, you take all of your unsecured debt (meaning anything that isn’t secured by collateral, such as your house or your car) and put it all on one low-interest credit card. You may have to shop around for a credit card with suitably low interest, such as one that is offering an introductory interest rate. Some cards may even have a promotional zero percent interest rate for a period of time, and those are the ones you want to take advantage of if you can. By getting a low (or no) interest rate card and putting all of your unsecured debt on it, you will be paying less on your debt each month and making only one monthly payment instead of many. This will make it easier for you to pay off your debt quickly.
2. Personal loan–Taking out a personal loan from your bank or a loan store can also help you get out of debt without bankruptcy. It’s similar to a credit card consolidation plan, except you get a lump sum of money up front and use it to pay off your debt. Then, you have one monthly payment to the company that gave you the loan. Once the loan is paid off, you are debt-free. Just be sure to shop around for a personal loan with a low interest rate before taking the money.
3. Home Equity–If you own your home and it has equity, you can get a home equity line of credit or loan to use to pay off your debt. It works the same as a personal loan, but the interest rate is usually lower and you have longer to pay it off. For homeowners, using home equity is usually the best means of debt relief without bankruptcy. If you own your home, this is the first option you should explore for financial freedom from debt.
Three Methods of Debt Relief That You Can Know by Credit Counseling
Being in debt is one of the worst situations possible. It not only restricts you financial freedom, it also hampers your social happiness and peace. Imagine you are at some dinner with friends or at some family gathering catching up with your relatives. In the meantime a creditor calls you asking about the details of your debt. You will not only feel harassed but embarrassed too in such a situation. Thus you understand the importance and urgency to get yourself out of such a situation. In order to make yourself debt free again, you should go for credit counseling. Credit counseling can enlighten you about the various methods of debt relief that you can use in order to get out of your debts. A brief synopsis of these debt relief methods are given below.
- Debt consolidation – This method of debt relief is the most popular one. It is highly effective for multiple credit card debts. It can be done either on your own or with the help of a professional agency. Whichever way you choose to consolidate your debts ultimately what you will get is a reduction in the interest rates of your outstanding debts and the benefit of single monthly payments. This means that you can pay back all your creditors by making one payment each month instead of multiple.
- Debt management – This process is similar to debt consolidation in essence. In this process you have to approach a professional agency to help you out. Once you enroll in a debt management program you will be provided with a negotiator who will negotiate with your creditors to reduce the interest rate on your debts. In this way you will get a lower interest rate on your debts and thus have to make lower monthly payments.
- Debt settlement – This process is for people who are already delinquent on their debts. This process is quite an aggressive one and needs professional approach to make it successful. In a debt settlement program, the negotiator who is provided by the debt settlement company bargains with your creditors to reduce your entire debt amount so that you can pay at least some part of your debt. The creditors agree as this option is better than bankruptcy. Thus you can be debt free by paying lesser amount of debt than what you owed.
Thus you can see how the above three credit counseling methods can help you to become debt free.