12 Solutions for Your Debt
When you have serious debt problems and you can not pay, all aspects of your life are affected. The only way to get rid of that situation and return to a quiet life is to find solutions.
With the different debt relief options we have today, solving debt problems is easier. The twelve most common solutions to get rid of all your debts are:
Debt Management Plan
The ideal way to start solving your debts is through a payment plan that you can make yourself.
Planning a budget and avoiding any unnecessary expense are two very important aspects in a debt management plan. If possible, consider working overtime and using that income for your plan and if personal discipline is a problem, you can schedule automatic payments at your bank.
Through debt negotiations, a company that represents you or you negotiate with your creditors to reduce the amount you owe.
Debt negotiation agencies work with your creditors to reduce the balance of your debt, sometimes up to 50-75%. Most debt negotiation companies are clear about the amount they will charge you, but make sure there are no hidden expenses in the negotiation process.
The consolidation of debts is a very beneficial process to solve numerous debts. In this process, multiple debts are consolidated in a single amount, the amount of which is paid through a single payment each month.
The interest on the consolidated debt is usually lower than the interest on the individual loans, however, if a person is using a home equity loan to consolidate the debts, their home will be the collateral for the loan and if that person can not pay, the lender can take the house and sell it to recover the borrowed money. Also, keep in mind that if the time to pay the consolidated debt is greater than that of an original loan, you will be paying more interest even if the interest rate is lower.
When you contact a debt consolidation company, the advisor will first analyze the amount of your current debt and then negotiate with the creditor in your favor and reduce the amount of the debt.
In most cases, interest rates are reduced and occasionally late payments and taxes are also eliminated. Once the total amount of the debt is reviewed, it is divided into monthly installments that make it easier to pay.
Debt Consolidation Loans
Debt consolidation loans help you combine all your outstanding debts into a single loan. For example, you can have a loan with a balance of $2,500 (15% interest rate), a credit card balance of $ 1,000 (interest rate of 12%) and a balance on a shopping card of a $500 trade (10% interest). All these amounts could be consolidated in a $ 4,000 loan (8% interest).
Actually the purpose is to reduce the monthly installments, since either interest rates fall on the new loan, or the repayment period lengthens.
Financial advisory companies help you eliminate your debts, but they do not consolidate them. They will develop payment plans for your outstanding debts with a lower interest rate and fees.
The procedure is that you make a monthly income to the advisory company and the company is responsible for paying all your creditors. You have to be very careful when choosing the consulting company.
This process consists of refinancing your home and paying your outstanding debts.
Refinancing at a lower interest rate will help you eliminate debts with higher interest rates that you are paying now. You can even develop a plan that has a lower cost than the current one, since the loan can be extended to pay for it in a longer time, but if you increase the time, the interest also increases. You need to understand clearly the total cost of the refinancing, because if you do not pay you lose your property.
If you have a retirement plan for your company, you may be able to get a loan from the company for your retirement money.
This type of loan is a better option than withdrawing money from retirement, since it saves you from paying additional taxes and penalties of up to 10%. If you can not repay the loan after a period, then you will have to pay taxes and penalties. If you lost your job, you would have to repay the loan immediately and pay the taxes for the early withdrawal of the money.
Credit unions usually have loans with lower interest rates and fees.
Home Equity Loans
Equity is the difference between the value of your house in the market and what you owe on the mortgage, that is, the part of the property that is yours.
Home equity loans allow you to borrow money against the value of your home, without any other mortgage. It is a fixed amount of money for a particular period.
The interest a person pays on the equity loan is lower than that of credit cards and other consumer debts. Also, these types of expenses are deductible, so you convert non-deductible interest into deductibles.
In most cases these loans also have attractive rates and convenient payment plans, however, interest rates are often variable and you run the risk of losing your home if you can not pay.
If you have life insurance you can borrow money from the policy at a very low interest rate to solve your debt problems. The advantage is that you do not have to repay this loan, but the life insurance benefits will be reduced by the amount you borrow plus the interest.
Whenever possible, it is advisable to pay the total debt of the credit cards.
Consolidating the debt of your credit cards is also advantageous because you can get a much lower rate compared to other types of consolidation loans.
Get in touch with the current issuer of your card to ask what kind of interest they will offer you if you transfer balances from other cards to yours. Ask them for a fixed interest and if they grant it, request that they do not charge you the transfer fees. Once your debts are consolidated on a card, be sure to plan the payment so that you pay the debt as soon as possible.
Bankruptcy should be the last option to solve your debts. Sometimes when the financial pressures are huge and you can not get to the end, you have to declare bankruptcy.
Bankruptcy is a temporary relief but it creates a negative impact on your financial report that will affect future loan applications, etc.