It is not uncommon to feel overwhelmed by your financial situation when you are carrying a high amount of personal debt. If you are like many others, you may find it a struggle to make the minimum monthly payments on your credit cards as well as other debts you have like your home mortgage, your car loans, your student loans, and more. While others are talking about saving for retirement or planning a great summer vacation, you seem to never be able to get ahead. So just how can you get the help you need to manage your debts and ultimately to pay them off?
Debt consolidation is a popular solution that many people are using to better manage their debt. Through this method, high interest debts like credit card balances are rolled into a low interest personal loan. With a lower interest rate and fixed term, often the overall monthly payment is lower than what you may be paying now. The personal loan will have a fixed term for a certain number of years. At the end of the term, your debt is paid off entirely. Revolving debt can take many years to pay off, and so this strategy lowers your monthly payment and helps you pay the debt off faster. Loan options include secured or unsecured personal loans, a home equity loan, or even a loan on 401(k) or whole life insurance policy.
Another option to consider is debt settlement. Debt settlement should be considered secondary to debt consolidation because it does have the likelihood of lowering your credit rating. Through this process, you generally work with a professional debt negotiator who in turn contacts your creditors on your behalf. The end result of negotiations is that some or all of your outstanding debts may have some debt written off, and some or all of your debts may have restructured and more beneficial repayment terms, too. Any debt that is written off will be counted as income on your tax returns, and so you do want to consider the tax consequences as well as the consequences to your credit rating before proceeding.
In some cases, debt is too significant to tackle through these methods. For these individuals, bankruptcy may be a feasible solution. However, this option should be considered carefully, and you should talk to a credit counselor as well as a bankruptcy attorney to explore the pros and cons before moving forward.