Know Your Options for Getting Out of Debt
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I'm making this page outlining your options for getting out of debt because I suffered through several years of dealing with debt, and I want to save you hours of research.
I know how stressful and confusing it can be, so I thought a little work on my part would save a LOT of work and headaches on your end.
I know how stressful and confusing it can be, so I thought a little work on my part would save a LOT of work and headaches on your end.
Options for Getting Out of Debt - A Summary of Facts
There are many options for getting out of debt, but knowing which option will help you the most is a very important first step. Many people are in debt due to impulse spending or lack of accurately budgeting their finances, but the good news is that both of these problems are curable for someone who is committed.
Also, if at all possible, it is best to always pay your bills on time if you are able. If you are not able, or can see that you won't be able in the near future then a change is needed.
To accurately consider your options for getting out of debt you must do some research. You should be wary of 'sales pitches' that claim that the option they are selling is a 'One Size Fits All' type of remedy. It would be like asking a BMW salesman what type of car to buy%u2026 his answer would be a BMW, even if you couldn't afford one.
Now that you know that you want to understand ALL of your options for getting out of debt, let's go over many of the most common programs and alternatives available:
Also, if at all possible, it is best to always pay your bills on time if you are able. If you are not able, or can see that you won't be able in the near future then a change is needed.
To accurately consider your options for getting out of debt you must do some research. You should be wary of 'sales pitches' that claim that the option they are selling is a 'One Size Fits All' type of remedy. It would be like asking a BMW salesman what type of car to buy%u2026 his answer would be a BMW, even if you couldn't afford one.
Now that you know that you want to understand ALL of your options for getting out of debt, let's go over many of the most common programs and alternatives available:
Options for Getting Out of Debt #1:
Do Nothing Different Than You Are Doing Now...
Most times this isn't a good option because your current spending habits are not in line with your income, and are the reason that you are in your existing situation.Advantages:
-You don't have to change your lifestyle until you run out of money and credit.
Disadvantages:
-You will probably live in the cloud of debt for the rest of your life.
-You won't be able to ever get credit again to buy a car, house, or any other large asset.
-Creditors will call you daily until you resolve your situation.
-Your bad credit rating may cause you to miss opportunities such as better employment or starting your own business.
Options for Getting Out of Debt #2:
Get a second income...
This can work temporarily, and may fix your problem but usually the reason that most people like you find themselves in debt is that you overspend, NOT because you don't make enough money.
Advantages:
-You have more income to pay your bills.
-Can keep your credit in good standing if you make enough to stay current on your bills.
Disadvantages:
-If you don't change your spending, having more income will most likely just end up getting you into even more debt.
-You will have less time with family and friends.
-It may jeopardize your "full time job" if your extra job causes you to be burned out or less effective.
Advantages:
-You have more income to pay your bills.
-Can keep your credit in good standing if you make enough to stay current on your bills.
Disadvantages:
-If you don't change your spending, having more income will most likely just end up getting you into even more debt.
-You will have less time with family and friends.
-It may jeopardize your "full time job" if your extra job causes you to be burned out or less effective.
Options for Getting Out of Debt #3:
Get a debt consolidation loan...
Debt consolidation loans are basically a loan that will allow you to typically get a lower interest rate than you are currently paying on your existing credit cards, stretch out the term of your loan, and allow you to make one payment rather than paying each card individually.
Advantages:
-Buys more time to pay off your bills.
-It can lower your monthly payment and provide a slight amount of monthly cash flow relief.
-Can keep your credit in good standing.
Disadvantages:
-You must be committed enough to changing your spending habits for a debt consolidation loan might be a viable option.
-Your credit, income, etc. must still be good enough to qualify for the loan.
-Your payment won't go down significantly.
-The loan often ends up costing more (because you end up paying more interest on a longer loan term) than if you were able to pay off your credit cards on the original plan.
-Once you make payments into the loan, you don't have access to the funds in the event of an emergency.
-You still pay the entire amount of the loan plus interest (and any fees for the loan).
Advantages:
-Buys more time to pay off your bills.
-It can lower your monthly payment and provide a slight amount of monthly cash flow relief.
-Can keep your credit in good standing.
Disadvantages:
-You must be committed enough to changing your spending habits for a debt consolidation loan might be a viable option.
-Your credit, income, etc. must still be good enough to qualify for the loan.
-Your payment won't go down significantly.
-The loan often ends up costing more (because you end up paying more interest on a longer loan term) than if you were able to pay off your credit cards on the original plan.
-Once you make payments into the loan, you don't have access to the funds in the event of an emergency.
-You still pay the entire amount of the loan plus interest (and any fees for the loan).
Options for Getting Out of Debt #4:
Refinance your home and pay off your credit cards...
Advantages: -This is similar to a debt consolidation loan so your payment will go down.
-Refinance loan rates are typically lower than a regular debt consolidation loan because your home is backing up the debt, thus your payment should be lower than a regular debt consolidation loan.
-This loan is unique because as you make payments toward the loan, it can build up toward your equity in the house and you may be able to access the funds at a future date once you have significantly paid down the loan (usually at least 35% paid off or more)
-Will not effect your credit rating very dramatically as long as you can make your payments on time.
Disadvantages:
-The biggest risk is that you could lose your home if you cannot make your monthly payments.
-It will take you 30 years to pay off your debt.
-You need to own a home with a minimum of 20-30% equity for this to be an option.
-With such a long term loan, you will end up paying much more in interest over the course of the loan than a shorter term solution would provide.
-You will be accountable to pay back the entire balance of the loan along with refinance loan fees (often paid up front) and interest.
Options for Getting Out of Debt #5:
File Bankruptcy...
Advantages:
-Creditors will stop calling.
-You might be relieved of all of your debts if you qualify. (However, it might just turn into a long term repayment plan depending on how your BK is structured)
Disadvantages:
-Your credit score will be affected negatively.
-Bankruptcy stays on your credit for 10 years.
-You might still have to pay back all of your debt (depending on your structure)
-Up front costs of filing Bankruptcy often exceed $3,000 (but prices vary)
-If filed incorrectly your Bankruptcy may be thrown out of court.
-Many jobs or applications ask if you have ever filed Bankruptcy.
-Public embarrassment.
-Creditors will stop calling.
-You might be relieved of all of your debts if you qualify. (However, it might just turn into a long term repayment plan depending on how your BK is structured)
Disadvantages:
-Your credit score will be affected negatively.
-Bankruptcy stays on your credit for 10 years.
-You might still have to pay back all of your debt (depending on your structure)
-Up front costs of filing Bankruptcy often exceed $3,000 (but prices vary)
-If filed incorrectly your Bankruptcy may be thrown out of court.
-Many jobs or applications ask if you have ever filed Bankruptcy.
-Public embarrassment.
Options for Getting Out of Debt #6:
Debt Settlement...
Debt settlement is the process of working with your creditors to get them to accept a lesser sum that you owe in exchange for your paying off the debt in a lump sum. This is typically an option for people who want to get out of debt quickly and don't see any way to do that because their current bills are too high.Advantages:
-If you work with a good debt settlement program you will have access to any money (less fees) paid toward your debt settlement program at any time during the process.
-You will typically pay less than 50% of the amount of your original debt owed (IE. If you owed $50,000 you would only end up paying off $25,000)
-Your monthly payments into the debt settlement program are dramatically lower than your minimum credit card payments - usually about half.
-A debt settlement program should be able to have you debt free in 1 to 4 years, rather than dealing with your debt for 20-30 years.
-No up front costs for a good program, so there is little to no risk of being scammed and you are able to keep your savings and cash flow for emergencies, etc.
Disadvantages:
-If your credit was good before entering a debt settlement program, your score will drop while you are in the program.
-Creditors will most likely continue to contact you until you have settled your account with them.
As you can see, each of your options for getting out of debt has is advantages and disadvantages, and your individual case will determine which options are best for you.
A good next step is to contact an expert that works with many different options for getting out of debt, and explain your situation to them. If they are a 3rd party (that means that they don't offer the services themselves) company, then they should be able to help you make a non-biased decision about what services and companies are the best fit for your situation. Also because they are experienced they may be able to refer to you reputable companies that can help you turn your finances around and create a plan for your future success.
One company that I recommend is called Red Carpet Resources and it is free to talk with one of their specialists. I have found them to be very helpful, honest, and un-biased about the advice and council that they offer.
You can find them at: http://RedCarpetResources.com
On their website, they also offer a great Free Checklist Report that you can download. It gives you many good points to consider while figuring out your choice of companies and plans to solve your financial challenges.
In the end, be sure to contact a good reputable company and use a professional. The financial world can be confusing and intimidating, and just as you wouldn't go to court without an attorney- having a professional on your side while figuring out a plan will make all the difference.
Which Option Looks Best to You?
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My Favorite Related Links:
- Credit Card Debt Settlement Program
- This company has many different programs that help people like you to figure out their options for getting out of debt, paying off credit cards, lowering your mortgage payment, increasing your credit score, and other services... They Rock!
- Success Secret Weapons
- This site offers ideas and programs for creating a second income by starting your own business or working from home. A lot of good info, especially on internet marketing.
- Credit Card Debt Settlement Facts
- This is another Squidoo Lens that offers more useful information on Credit Card Debt Settlement and how it works.
by rcr310
I am a teacher, student, artist, and friend to the world. My passion is helping people succeed and find happiness in any way possible.
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