There are very few people in this day and age who manage without some form of borrowing, whether it is credit cards, personal loans or mortgages. However, there comes a point when debt becomes unmanageable and simply getting another credit card is not the answer. If this happens, there are several options that can help get things back onto a level footing once again and ease the stress that comes with financial difficulty.
Many people with multiple creditors find that part of the problem is simply juggling all the different payments that are due and organizing a repayment plan which satisfies everyone. In these cases, a consolidation loan may be the answer.
Getting into more debt might not immediately sound like the smartest move when you are struggling with money, but having all of the repayments condensed into one monthly sum makes life much easier to manage, which is often half the battle.
It can also work out cheaper each month, as having one large loan often means a lower interest rate than lots of small debts, but if the length of the loan increases, it may actually be more costly.
Another form of borrowing that can help is a home equity loan. This type of finance will have a particularly low rate of interest and can, in some cases, also be listed as a deductible on a tax return, thereby reducing the amount of interest even further.
Those who either do not want to get into more debt, or cannot get the finance approved, still have other options to consider before heading towards bankruptcy.
Debt management plans are an option that allow the amount due to be repaid each month to be lowered, with the creditor’s agreement. It is possible to negotiate a debt management plan directly with your creditors, but most will respond more favorably to a recognized debt firm who will budget, communicate and negotiate with all creditors on your behalf. Debt management plans will generally affect the credit rating but offer a flexible solution that can be reversed easily should the financial position improve.
For those in genuine and severe financial difficulties who cannot afford the repayments on a debt management plan, debt settlement may be an alternative solution to consider. Debt settlement is very different to consolidation and even debt management, as it involves a large portion of the debt being permanently written off. Penalties and interest payments are usually frozen whilst the payments are being made and it is usually possible to repay the agreed portion within a one to four year period, leaving you debt-free.
The down-side of debt settlement is that it is only one step away from bankruptcy and can have severe repercussions on your financial history and make future credit almost impossible to obtain. It also cannot be used to pay off secured debts such as mortgages, or alimony arrears. Any individual struggling with debts will find that there are several possibilities open, but the right option will vary from person to person depending on individual circumstances.