Are you wondering how to get out of debt? First, congratulations on considering one of the most important questions related to your financial future. Debt can be used as a wise tool in some situations, for example obtaining a mortgage makes home ownership possible for those of us that don’t have cash on hand to purchase a home. Student loans are another form of debt that has traditionally been accepted, as the price of education cause a formal education to be otherwise unattainable for many. However, when it comes to making ends meet, debt can become a trap. As Warren Buffet has said,
“The chains of habit are too light to be felt until they are too heavy to be broken.”
This certainly applies to the use of consumer credit. Balances can take over and before you realize it, minimum monthly payments can grow to levels that your current income can no longer afford. If this is the situation you’ve found yourself in, read on to understand how you can become debt free.
Debt consolidation is a term used widely to imply the combining of multiple loan payments into one. When seeking debt consolidation, you may be able to:
- Lower your interest rates
- Lower your monthly payments
- Protect your credit rating
- Help get out of debt faster
As far as debt consolidation is concerned, you want to keep an eye on the total amount of interest to be repaid. While obtaining a lower monthly payment is helpful, you don’t want to do this at the expense of thousands of extra dollars in interest. This is often the trade off when it comes to using this option to get out of debt.
Another option to get out of debt is called debt management or debt counseling. Those considering bankruptcy will be presented with this option, as it is now required in terms of budget evaluation prior to filing. This is also looked at as the “non-profit” debt relief option, as it is administered on behalf of creditor and consumer by an intermediary. This debt relief program seeks lower interest rates and a “managed” monthly payment. Similar to loan consolidation, you would make just one monthly payment and this would be distributed to your creditors on your behalf. If you would like to learn more about this option, you can read here.
Consumers who are looking to get out of debt must faster than the above options are typically drawn to what is called debt settlement. This form of debt relief seeks to help consumers who cannot afford their monthly debt payments, and who don’t wish to file for bankruptcy. Often behind in making minimums, consumers work with a 3rd party company such as Debt Support Center, Inc. The company presents a plan, and consumers begin to save up enough money to then settle with their creditors for less than what was previously owed. Of course there is more to understand about the process, but in the end consumers often realize a fresh start by reducing their unsecured debt amounts faster than they could have done on their own. You can find more information, here.
What’s Best for You?
We maintain that every person’s situation is different, thus we stress the importance of a one-on-one conversation. If you would like to know how to get out of debt, and have questions, please reach out to us today!