Debt Repayment Methods
The overwhelming amount of debt where you are struggling to pay just the bare minimum of the payments, and it weighs down on your budget; a situation one finds themselves in, usually as a result of poor choices and bad spending habits, generally being the keyword. To repay all this debt and financially breathe easy again, you have to be tough and take charge. Here are a few ways to help you pay that debt:
Negotiate and Pay on Your Own
The first step on your debt recovery is to take responsibility for your actions and then set out to correct them. Inventory is essential. Asses your debts, the amount you owe along with the interest rate, and make a plan to pay off that debt and make that plan work. You may need to call your lenders and creditors to ask for lower interest rates, to figure out a payment schedule or to negotiate with them the amount that you pay them if you can only afford to pay a certain percentage of the amount you owe. Come up with an agreement that is acceptable to both you and your creditor and then diligently follow through.
Consolidate Your Debt.
Combine all your debts into one single monthly payment. You can do that either by taking out a debt consolidation loan as a personal or unsecured loan which has no requirement of putting up an asset as collateral, or you can take out a second mortgage or a home-equity loan.
Consider Credit Counseling.
Signing up for a credit counseling service is also a good option. The service will, upon careful evaluation of all your debts and monthly income and expenses, work with you to provide a budget as part of a debt management program, that you can follow, or find a better lower interest loan deal or negotiate with your creditors for acceptable payment options. They can also teach you much needed money management skills. Also be careful when choosing the counseling service though. Pick a reputable one because you don’t want to be scammed into a worse credit standing than you began with.
Debt Settlement.
If you are very behind on your debt payments, then the alternative to consider might be debt settlement. It’s an excellent option to avoid filing for bankruptcy while allowing you to clear up a significant amount of your debt with far less money than you owe. Debt settlement involves you having to pay a determined amount of your debt with the rest to be forgiven. It does affect your credit score negatively, and you need to make the payment of the negotiated amount within a short period as a lump sum, but it is a far better option than having a long overdue debt show on your credit report.
Bankruptcy
At a point where your debt is too much for you to pay relative to your monthly income, it would be a sensible idea to file for bankruptcy. Hiring a bankruptcy lawyer ensures that you get a deal you are comfortable with while also preventing you from being abused and scammed by following the bankruptcy laws. Depending on the situation you may find yourself in, your lawyer may suggest filing for Bankruptcy Chapter 7 or 13. Chapter 7 will completely wipe out your unsecured debt and may cause possession of assets that you may or may not have put up as collateral, for example, your home or car if you have equity. Bankruptcy 13 is the type of bankruptcy that will allow you to pay off your debts in three to five years by creating a payment plan.
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