Dealing with increasing debts is a scary proposition. If you continue along the path you are on you will be stuck helplessly watching your bills grow while your bank accounts dwindle and you face the prospects of missed payments, collectors and a diminishing credit score. If you start haphazardly trying to contain your debts through payday loans and credit balance transfers, you may make the problem even worse.
Depending on the severity of your debt problems, there are a number of solutions available to you
Fortunately, there are options for people whose finances are about to or have already spiraled out of control. Depending on the severity of your debt problems, there are a number of solutions available to you.
Budgeting away your debt problems
If your problems are getting worse but you still have a manageable amount of debt (less than $10,000), your best option may be to just start being smarter with your money
. Take the time to map out exactly where your paychecks are ending up. See if there are relative luxuries that can be done without. It may mean canceling the cable subscription, using public transportation and packing a lunch for work, but if these changes mean the difference between making your payments on time and allowing them to go delinquent, they'll definitely be worth it in the end.
If after trimming down your spending you still struggle to meet your monthly obligations, look into putting in more hours at work where possible or taking a temporary part-time position. It may not seem like it right now, but taking care of your financial woes by yourself is the best way to ensure a strong financial future.
Consolidating your debts and lowering payments
Depending on the type of debts you have, your credit rating and whether or not you own a home, you may be able to consolidate your debts
and lower your overall monthly payments. Typically, unsecured debts such as credit card debt leave you with high interest rates that make it difficult to make the minimum payments let alone make significant progress towards paying down the principal. Through debt consolidation, you may be able to take all of these high interest debts and lump them into one lower interest rate payment. The result will be a lower monthly bill and a way to make paying down the overall debt amount a more manageable task.
If you own a home, you may be able to refinance your mortgage
and secure your debts. If you do not own a home, you may still be able to consolidate your debts using a personal signature loan or with the assistance of a debt consolidation company.
Of course, if after consolidating your debts you still continue with the practices that got you into trouble in the first place, your debt problems will continue. When consolidating your debts, you must also take the time to properly budget your money and refine your spending habits. If you own a home, you may be able to refinance your mortgage and secure your debts. For a free no obligation quote go to our home loan center
Get professional help through debt counseling
It may be the case that the amount of your unsecured debts such as credit card debt, medical bills, legal bills and personal loans has reached a point where you need professional assistance. If you owe more than $20,000 in unsecured debt and do not own a home or enough equity built up in your home, it may not be possible for you to take care of your financial problems on your own. At this point, you should look into getting help from a debt counseling organization
A debt counseling company will contact all of your creditors and try to negotiate lower interest rates on your debts so your monthly payments will be smaller. In exchange for lowering your interest rates, your creditors will add an R7 rating to the account on your credit reports which will lower your credit score. As such, debt counseling should only be used when you are unable to make your monthly payments even after proper budgeting of your finances and are not able to lower your payments through debt consolidation. If this is a situation you are facing, we suggest our trusted partner www.careonecredit.com
Facing bankruptcy? Debt settlement may be an option
When debt counseling isn't enough and you are faced with the real threat of having to declare bankruptcy
, debt settlement may be the last resort. Debt settlement may be able to get you out of your debt woes, but at a hefty price.
When you sign up with a debt settlement company, you basically hand over all control of your bills. You pay them a set amount each month, and they take care of the rest.
A debt settlement company will then do what is known as aging your debts. They will withhold payment from all of your creditors until they begin to fear you will default on your payments and they will never get paid. The debt settlement company then begins to negotiate with your creditors in order to lower the actual amount you owe (this is different from debt counseling where only the interest rates are lowered). When these debts are renegotiated, the debt settlement company will pay your debts using the monthly payments they have been receiving from you.
When you are done using a debt settlement program, you may have taken care of your debts and paid less in doing so, but your credit report will be in shambles
. All of the late payments and collections accounts that have been added while your accounts were being aged will be listed in your reports. For this reason, debt settlement should be considered only as an alternative to bankruptcy when your credit rating is likely very poor already.