People with huge debts on their accounts really need to take debt consolidation seriously. If not, they may be forced to seek bankruptcy sooner or later just to be set free from the debts they owed. Always remember that filing for bankruptcy is a last resort and that a record of bankruptcy can be very damaging to your credit history. In this article, we’ll be focusing on some of the debt consolidation options you can choose to overcome debt problems.
Debt settlement means negotiating with your creditors so that your debts can be cut down or reduced, depending on your creditor’s decision. Through this arrangement, it is possible to slash off about 40% to 60% percent of your original debt. Nevertheless, once a debt settlement has been agreed, you are expected to pay off your creditor the entire sum of money at once.
Debt consolidation loan
A debt consolidation loan is extended to those with outstanding debts or credit card balances. The loan is used to pay off all existing debts from your creditors. Afterwards, the borrower must pay back his debts to his lending company.
One advantage of a debt consolidation loan is that it cuts off the interest fees to just a single interest payment. Typically, a debt consolidation loan is secured by submitting one’s home or property as collateral. However, it is also possible to find unsecured debt consolidations loans from several lenders.
Caution must be done when taking out a consolidation loan. Make sure that you are aware of the rates and terms required by your lender. Therefore, completely read and understand your debt consolidation contract before signing up for the loan.
Credit Counseling or Debt Management Plan
This involves helping the borrower to execute an efficient budget plan or debt management plan not only to get free from debts but also to avoid getting stuck in debt all over again. If you find it difficult to manage your finances or control your spending, the problem may be a lot more serious than you think.
Seeking credit counseling should be able to help you take control of your finances. Just remember to check the background and reputation of the credit counseling agency you’ll run to. Some false credit counseling agencies do not offer help at all and charge unreasonable fees for their services. Therefore, check the company’s track record and choose one that is accredited by the government and national organizations.
Balance transfer Credit Cards
Another way to consolidate credit card debts is by getting a balance transfer credit card. If you own more than two or more credit cards and you have existing balances with each of these cards, you have the option to consolidate these balances into one.
Balance transfer credit cards usually offer lower rates of interest or zero APR for a certain time period. For instance, a zero interest period may last from 6 months up to one year. During this time, the credit card holder can pay off the original amount of his credit card balances without incurring additional interest rates. Although balance transfer credit cards offer only a temporary relief, one can take advantage of this period to get off from credit card debts.