Exploring Different Debt Relief Options

Debt has become an individual as well as national problem, which stems primarily because of the rapid use of credit cards. Each month, we aim to pay off our credit card bill in full, but are unable to succeed. Stagnant incomes, rising cost of living, undisciplined spending and unexpected life events are only some of the reasons that have increased the number of people who are struggling to get out of their debt. Consider the high interest rates that are usually charged by creditors, and it becomes an impossible task to manage debt effectively. One of the most important steps for achieving debt relief is look at the different options that can be used for solving the problem.

Each debt relief solution that can help people in relieving their debt is unique. People need to learn the facts about each and every option before deciding which one is suitable for their financial situation. Some of the debt relief options are as follows:

Mortgage Refinance

People have the option of going for mortgage refinance or home equity loan for consolidating their debt. Debt consolidation refinance loans are considered to be the best option for individuals when they wish to reduce their payments and also lower the cost of interest, as long as they are confident that they would be able to make regular payments without adding more credit card debt. A homeowner has to have excellent credit if they wish to qualify for a mortgage refinance loan and their home should also have significant equity.

Minimum Credit Card Payments

A very dangerous financial strategy for people is to make only minimum monthly payments on their credit cards. This means that people are simply putting off the problem for another month. Individuals should try making their full monthly payments if they want to get off the debt treadmill and achieve debt relief. Otherwise, they will have to deal with the lifetime cost of the debt in the form of high interest payments.

Credit counseling

This is basically a debt relief program, which begins with a detailed and thorough financial review. If people have serious debt problems that cannot be resolved without outside help, the credit counselor will suggest that they opt for a debt management plan. In this program, the credit counselor has the responsibility of consulting your creditors for obtaining concessions in interest rates. The major benefit of a credit counseling program is the lower interest rate it can offer to individuals.

This debt management plan is a very straightforward debt consolidation program. Individuals are only required to make one single payment to the credit counseling agency instead to the creditors. The payment is then distributed by the agency to the different creditors of an individual.

Debt Settlement

This debt relief service involves negotiating and settling the debt of an individual for an amount that’s less than what they owe. This can even reduce debt by nearly half and it is an option for those individuals who find it difficult for making their monthly payments, aren’t worried about their credit rating and only want to achieve debt relief.

Bankruptcy

This should always be the last option for individuals and should be chosen after every other alternative has been exhausted because it will stay on their credit report for at least 10 years and will also mean that people have to give up some of their assets.