Debt Relief: Your Options

If you are struggling with high levels of debt, it is important that before you make any decision, you know what your different options are. There are several different options that can help you with the pain of having too much debt, but you want to do what is right for your individual situation. You want to gather as much information as possible, the last thing you want is to make your current situation worse.

Debt Relief Options

1. Debt Settlement – Debt settlement, also referred to as debt negotiation, is when a third-party agency negotiates down the amount owed to a lower sum. Debt Settlement Cost: Usually 15% of your debt.
2. Debt Consolidation – Debt consolidation is a loan. The loan proceeds are used to pay your creditors and you repay the loan to a debt consolidation agency. This option works best if you qualify for a loan high enough to cover your debts and those debts have high interest rates. Debt Consolidation Loan Cost: The interest paid on the new consolidation loan.
3. Home Equity Loan – A home equity loan falls under the category of consolidation. You borrow money as a secured loan against your home, using the equity of your house. These loans are usually adjustable interest rates and you must qualify for the loan. Today, most lenders require a very high credit score and a strong equity position in your home. Home Equity Loan Cost: The interest rate plus lender fees.
4. Credit Card Balance Transfer - A credit card balance transfer is another option similar to consolidation. You transfer your balances from other credit cards to a single, usually new, credit card. Often you can get 0% interest as an introductory offer, but after a short period you will pay high credit card interest rates. Credit Card Balance Transfer Cost: Any interest you have to pay on the new credit card and annual fees, if applicable.
5. Debt Counseling – Debt counselors reorganize your payment plans and give you a longer amortization period allowing for smaller monthly payments. Once completed, lenders often consider these programs similar to bankruptcy and you may have a more difficult time re-establishing new credit. Debt Counseling Cost: Usually a one-time enrollment fee into the counseling program plus a monthly fee .
6. Do-It-Yourself – If your debt is manageable, you may want to approach it the old fashioned way and pay off all the balances. In order to accomplish this, you must follow a strict payment schedule and if you pay the minimum payments you will make those payments for an extended time period. Do-It-Yourself Cost: The interest you pay before deciding that you need help.
7. Bankruptcy – Bankruptcy is usually the very last option someone chooses. Bankruptcy laws have changed and are more restrictive than in the past. Once completed, most have a long and difficult path to re-establishing their credit. Bankruptcies remain on your credit report for up to 10 years. Bankruptcy Cost: $5,000.00 average per bankruptcy filing.