Many people struggling with debt are tempted by the short-term fix of debt settlement. This option allows the debtor to pay the creditor less than they owe. Sounds great, right? Unfortunately, debt settlement is actually a massive knock against your credit score and the associated fees can offset what was saved. People serious about managing their debt should consider other options and avoid settling for less.
Eliminate Debt with Proper Debt Management
So if debt settlement isn’t a solution, then what other options are there? Fortunately, there are a myriad of options to select from. The difficult decision is determining which of the debt management options is right for your situation. Before looking at the possible options, it’s important for debtors to analyze their debt, income, monthly expenses, and current credit rating. By knowing the specifics of these elements, you’ll be able to determine which of the debt management options is best for you.
Debt negotiation. If you are facing a temporary financial hardship, discussing the situation with your creditors is a good way to avoid late fees and penalties while readjusting the terms of your loan. If you explain your situation and follow basic procedure, most creditors will work with you to create a temporary alternative payment schedule.
Debt consolidation loan. This is one of the debt management options that simplifies the complexity of paying multiple bills at once. The largest downfall of this option is the lack of secure interest rates. In fact, if you currently have low interest rates on your existing debt, a consolidation might actually result in higher interest. Be sure to ask about all the terms before taking out a debt consolidation loan!
Personal bankruptcy. If none of the other options are feasible or will adequately solve your dilemma, a Chapter 7 or Chapter 13 bankruptcy might be your only option. This is one of the least popular debt management options because of the negative stigma and consequences. However, a personal bankruptcy does provide the opportunity for a fresh start!