The road to hell is probably one of the most pleasant trips you will take, as the road to debt hell is always paved with good intentions.
- Buy this.
- Buy that.
- Eat at the best restaurants.
- Take a vacation.
- Live beyond your means.
- Max out the credit cards.
- Don’t save for a rainy day.
- And don’t worry about the incoming monthly bills.
If you are chronically up to your eyeballs in debt, you might be forgiven to think that you have only two, or maybe the three, options.
Traditional Ways to Get out of Debt
Many Americans still look at the traditional ways to get out of debt.
1 Filing for bankruptcy is seen as a negative approach and it carries a stigma with it because of the difficulty to improve your credit rating in the future.
5 Efficient Debt Solutions
If you look at all your options, there are seven debt solutions from which consumers can choose to arrest debt problems. Like everything in life, there are pros and cons to each solution.
1. BANKRUPTCYPros Bankruptcy provides almost immediate relief with an automatic stay on debts and payments. There is a court order that stops the collection of debts by creditors as well as stopping them from contacting you. In addition, they cannot garnish your wages, start a lawsuit or repossess any collateral. That is, you will be free of those debts and would cease to owe them any more legally. Cons Bankruptcy doesn’t do your credit report any favors, and is one of the toughest negatives to overcome.
2. DEBT SETTLEMENTPros For consumers to get out of debt this is, in some respects, the least expensive and quickest way to do it. You negotiate with your creditors to pay a certain percentage of your mainly unsecured debts, and with a plan that includes scheduled payments. It’s advisable to use an experienced negotiator.
If properly done by a professional company, it can eliminate 60% – 70% of a borrower’s debt balance and often the debt is fully paid within three years. This is best used with credit cards, hospital, and medical bills, utilities, and rent.Cons Not all your creditors will agree to this and you are still in debt until all the agreed amounts are paid off.
3. DEBT CONSOLIDATION
With debt consolidation, you apply for a loan that will pay all creditors and will leave you with just the one loan repayment. It usually means a longer repayment period but with lower payments. Most consolidation loans are done through home equity and mortgage, but it can also be done with a personal loan, secured or unsecured depending on your credit status and employment. Are you borrowing money to pay off borrowed money? Well, in the case of a debt from hell, some might consider it heaven-sent.Pros All your debts are rolled into one, smaller repayments, lower interest. Cons In the case of using home equity it means a longer mortgage period. A personal loan may require security.
4. DEBT COUNSELING
Sometimes, people just need advice or a positive plan and some motivation from experts on how to handle debt, lower their debt levels and to live within a budget. Counseling can also provide services that will negotiate with your creditors, for a fee, similar to Debt Settlement explained earlier.Pros You would normally end up owning only a small percentage of your total debt if the negotiations are done well. Lower payments, a reasonable repayment period and no injuries sustained by your credit rating. Cons There are not a lot of negatives in this method and it’s a great way to get out from your debt hell. You have to change your ways.
5. DO NOTHING
This is a favorite option for many of those people trapped in their own debt hell. You can completely ignore your creditors, pay them nothing and have no communication with them at all. Letters, phone calls, and emails can be allowed to simply pile up. While your creditors turn up the heat, you just keep struggling along. The interest keeps getting higher and the debt gets to a point that it becomes impossible to keep afloat and for you to get out of your personal debt hell!Pros Sometimes, creditors simply give up and realize that they can’t get blood out of a stone. That depends on the size of the debt, of course. If you have nothing to lose, no car, no house and no possessions, then basically you can win the battle. Cons Your credit rating is shot to pieces. If you want to change your lifestyle, it’s going to be tough. You may have to rethink and opt for one of the above.