Whether it’s a matter of bad choices, tough circumstances or a bit of both, accepting life in debt can only bring debtors ongoing emotional turmoil. There’s also the fact that 73 percent of U.S. adults die in debt — a significant chunk of the deceased (68 percent) had credit card debt.
What’s more, the average household balance that carries credit card debt has a balance of over $15,000. With monthly interest rates four or five times a standard mortgage payment, progress on debt is hard to come by without committing to a debt relief strategy.
Here are four types of debt-assistance strategies for varying severity levels.
Credit Counseling & Debt Management Programs
Getting serious about erasing debt requires a debtor to get organized. Only when organized can the reality of the situation and its consequences be understood. If your situation needs attention but hasn’t gone out of control yet, credit counseling and debt management programs can get you back on track. Credit counseling organizations usually offer free consultations about money management and budgeting. In some cases, they may also offer a debt management plan where debtors send one monthly amount to the organization, which is then distributed among creditors in the most efficient way possible.
Everybody has their own ‘ah-ha’ moment. If that moment comes when your monthly income and snowballing interest rates no longer equate, debt consolidation could provide a fresh basis for you to get out of debt. Debt consolidation can include various strategies, but getting a personal loan or using a balance transfer card are popular routes. However, if a credit score isn’t good, it’ll be challenging to secure a good interest rate on a personal loan. Balance transfer cards may still be possible, but likely not with an 18-month zero-interest introductory rate that makes them so attractive. Additionally, owning a house enables debtors to free up equity they’ve earned through strategies like a home-equity loan, an equity line of credit, or a cash-out refinance.
When debt has surpassed manageable levels, particularly when payments have lapsed, and late payment notices have started to rack up, debt settlement becomes a viable solution. This is because when debtors slip on creditor payments, in addition to hurting their credit score, they also gain some leverage in having their balance reduced to a lower amount.
Debt settlement can be done by an individual or through a company. Depending on a debtor’s circumstances, some creditors may be willing to resolve a balance at a lower amount to recoup some costs versus none at all. But as simple as it sounds, debt settlement isn’t a quick process. Debtor experiences, like described in these Freedom Debt Relief reviews, indicate a multiple-year process and fees paid on any settled debt. However, many anecdotes also highlight the emotional relief debtors get from getting support for something that’s weighed on them.
A more traditional form of personal debt relief, declaring bankruptcy can eliminate all your debts. If you declare Chapter 7, your debt can be forgiven in as short as 3 months, but a court may liquidate some of your personal assets to pay back your debt. If you declare Chapter 13, you’ll need to make payments to a court for 3-to-5 years to have your debt removed. As you can imagine, both options stay on credit scores for a while, but chapter 7 lingers longer (10 years versus seven). Debtors considering bankruptcy to avoid paying fees should be aware that bankruptcy carries its own; in the form of lawyer costs, court expenses and financial management courses.
Life can be stressful enough without debt getting in the way. Put an end to the stress and commit to a debt-assistance strategy today.
Disclaimer: This content does not necessarily represent the views of IWB.