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In Debt Over Your Head? A Simple Guide to a Few Available Options

Posted By:  |  February 24, 2014  |  0 Comment(s)


With most Americans having many different sources of debt through credit cards, student loans, and mortgages, it can at times feel a bit overwhelming. Do you feel as if you’ve gotten in over your head? Don’t worry—many people feel the same way. And luckily, there are several options available to help you manage your debt, getting you back to where you can comfortably pay down your debt and make your way to becoming debt-free. Check out these common debt relief options available to you.

Create a plan it Off Yourself

Your first step to getting out of debt should be trying to pay it off yourself. Create a get out of debt plan and start chipping away at the money you owe. Getting out of debt isn’t necessarily EASY, but it is SIMPLE. What we mean is it will take hard work, but will a solid plan, it is definitely attainable.

There are, however, times when you get so far behind that it makes sense to look for out side help. If you’re in a situation where you can’t pay your bills, and you have no idea what the future holds, then you may want to reach our for debt relief.

Simplify and Save With Debt Consolidation

If you have many different forms and sources of debt under your belt, and especially if you are having trouble staying on top of all the monthly payments associated with them, you may find debt consolidation to be a very helpful method of debt relief. Debt consolidation is the method of taking out one loan to pay off multiple debts, effectively rolling all debts into one loan. This method often allows the borrower to secure a much lower interest rate that can be fixed for the term of the loan, and can make life easier for you, as you’ll have only one payment to stay on top of each month.

Debt consolidation can be especially effective when a debtor is carrying a large amount of credit card debt, since credit cards carry much higher interest rates. Consolidating through an unsecured loan from a bank is often an even more effective method of paying down multiple credit card debts. Effectively, debt consolidation can be an ideal method of debt relief for people who want to save and simplify their debt, helping to avoid late payments, high interest charges, and the negative effects on your credit score that can result from delinquencies.

Working Together: Establish a Debt Management Plan

Perhaps a better alternative to debt consolidation, depending on unique circumstances, a debt management plan gives a debtor the opportunity to work with their creditors in order to establish a repayment plan over a fixed period of time. By using a debt management company, a debtor can obtain a tailored plan based on their income and realistic means of the repayment of their debt. As a formal agreement, the debtor’s income will be weighed against their expenditures each month, and the monthly disposable income will be divided amongst creditors to pay back the various loans and debts in a consistent, manageable way.

Correct Your Delinquencies With Debt Settlement

Generally used as a method to correct past missed payments that have been sent to credit collectors, debt settlement is a method whereby a professional company is hired to contact creditors and establish a lower, agreed upon amount to repay past loans and debts. Although debt settlement can affect a debtor’s credit negatively, it can also offer significant debt relief while saving the debtor money through negotiating a lower amount, which will be considered paid in full.

With several options you can consider to help you stay on top of your loans and credit cards, there’s no reason to feel “in over your head” for long. Before arriving at the point where bankruptcy is the only option, consider taking control of your finances and establish one of these methods to help you repay your debt while keeping your credit in good standing.

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  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

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