Debt is a reality for many Americans. However, no two financial situations are exactly alike. Thus, there’s no guaranteed, one-size-fits-all solution for tackling debt, despite it being a far-reaching phenomenon. A millennial carrying steep student loans will inevitably approach debt relief differently than a married couple with a mortgage, four children and double-digit credit card debt.
Knowing your options will help you choose the best strategy for you—not your neighbor, cousin or co-worker. People with a plan and plenty of commitment to the cause have a better chance of reducing or eliminating their debt entirely. So, consider these five debt relief strategies that really work to determine if one of them is right for your circumstances.
Working with a credit counselor can help consumers come up with a repayment plan and stay accountable until it’s complete. This process involves working with a trained, accredited counselor to negotiate with creditors and eliminate debt in five years or less.
Credit counselors may be able to get your interest rates reduced, making repayment more manageable over time. Plus, working with a reputable counselor provides access to general financial advice—something that’s helpful for both getting out and staying out of debt for the long haul.
One of the trickiest things about debt is that consumers rarely owe money to one creditor alone. Oftentimes, they find themselves flurried with notices, bills and phone calls from multiple creditors. It can be confusing to keep track of where your money goes and where you stand with each individual company.
Debt consolidation aims to simplify the process by allowing consumers to make one monthly payment. Consolidated debt depends on taking out a loan, using it to pay back creditors and then focusing on repaying the single loan instead. However, it’s important to note you’ll likely have to offer collateral for the loan, like a home or vehicle. This raises the stakes. Consumers should make absolutely sure they can handle a loan before pursuing this course of action.
Consumers who use debt settlement pay off less than what they originally owed in the form of either a lump sum payment or series of payments. Where do these funds come from? People pay monthly into a deposit account until it grows large enough to be enough to offer as a settlement to a creditor. Then, the debt settlement company negotiates with creditors on the consumer’s behalf to see if they will accept the lower amount sooner to resolve the debt faster. Debt settlement is a potentially beneficial strategy for consumers with poor credit interested in ending their stream of unpaid bills.