Escalating financial difficulties mean that receiving help with debts is vital. Whilst there are a number of private companies offering assistance, a debtor can also turn to a non profit credit counseling service. The majority of unsecured debts (with the exception of student loan debt) can be negotiated with a debt relief program, such as unsecured debt settlement.
Help with Debts
Perhaps the greatest obstacle to becoming debt-free is knowledge and experience. Although budgeting is the most obvious way of achieving financial parity, a low interest debt consolidation loan could be of assistance as well. There are also several debt relief programs available, including unsecured debt settlement, Debt Management Programs and filing for chapter 7 bankruptcy.
Improved Budgeting
Help with debts is especially important when expenditure exceeds income. Tackling the cause of personal debt is the only way that this problem can be alleviated. It is important to document all sources of income and expenditure so that potential savings can be quickly identified. Eliminate any unnecessary purchases. If budgeting doesn't help to balance the books, a debt relief program or low interest debt consolidation loan could provide the answer.
Low Interest Debt Consolidation Loan
It may be possible to get a secured HELOC loan or an unsecured loan from Prosper.com for the purpose of consolidating debt. Whether a loan to consolidate debts is the right option will depend heavily upon an individual's credit score. A poor credit rating is likely to mean that a debt relief program provides a better option. An equally important consideration is the type of debt as not all can be tackled with unsecured debt settlement.
Debt Management Program
Making debt repayments based upon the T&C's of the credit agreement isn't always possible. Instead, an intermediary will work with the debtor to establish how much can affordably be offered to creditors each month. After deducting a 15% management fee, contributions will be disseminated to creditors on a pro rata basis. Although there is no reduction to the principal (the amount owed), creditors may be prepared to freeze further interest and charges in order to help with debts.
Unsecured Debt Settlement
A professional negotiator will work with creditors to achieve a reduction to the principal of up to 50%. Any remaining debt is repaid over the next 12 to 36 months. The management fee is also 15%, but some debt settlement companies front-load fees (charge up-front). Only sign-up to a plan that takes their share each month in order to avoid future problems, such as creditor litigation.
Filing for Chapter 7 Bankruptcy
This is the best known source of help with debts. Whilst not suitable for everyone, it can allow someone with a high percentage of unsecured debt to become debt-free in just 4 to 6 months. The main negatives are that the matter is made public and it will show on a credit report for a period of 10 years. No debt relief program can be used to clear secured debt, student loans, current car loans, alimony or taxes.
The sooner that help with debt is sought, the less likely the problem will have chance to worsen. If improved budgeting doesn't resolve financial difficulties, a low interest debt consolidation loan or debt relief program may provide the answer. Always seek assistance from a qualified debt counselor before proceeding.
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