Most of the time, people who are drowning in huge debt need a quick fix. They want to get out of their debt as fast as possible. But, the truth is there is no shortcut to a debt-free life. It takes time, determination, and hard work to get out of debt.
However, if you find yourself knee-deep in debt, don’t panic. Getting out of debt is possible. You may have to accept some lifestyle changes to become debt-free.
How can you get out of your huge debt?
I have said that there is no shortcut to the debt-free path. Thus, you have to find out the total debt that you have and then make a list of all your debts first. There are various processes through which you can get debt relief by paying off the dues. However, if you want to get debt relief, you will have to change your style of living. There are some professional debt relief ways you can follow. You can also get out of your debt on your own by lowering the expenses and saving more. Find out the ways to get debt relief professionally.
Professional debt relief options
Enroll in a Debt settlement program
In debt settlement, the outstanding debt amount is reduced. You can negotiate with your creditors about your financial hardship and ask them to settle the debt amount. You can also get help from debt relief companies who will negotiate with your creditors about settlements, on your behalf.
Consider debt consolidation process
If you are facing problems in making several payments each month as per the high-interest rates, you can go for debt consolidation. Consolidation lowers the interest rate on your debts and consolidates them as single large debt. In this too, you can do it on your own or take the help of a debt relief or consolidation company.
Go for a loan modification
If you are unable to make payments on your secured loan (car or home loan), you can talk to your lender about it and request him to change the terms and conditions of the loan. This can lower the interest rate on your loan and also increase the loan term, thereby reducing the amount that you are required to pay.
Refinancing can help you to change the terms and conditions of the original loan as you take out a new loan. This helps you to lower the interest rate on your loan and lengthen the loan term.
Enroll in a debt management program
In debt management, you are required to enroll yourself in a debt management program (DMP), along with a debt relief or credit counseling agency. In DMP, the counseling agency will analyze your finances, help you in budgeting, negotiate with your creditors and disburse your payments amongst your creditors each month.
Seek credit counseling
This is of help to you when your credit card debts are still manageable. You enroll in a credit counseling agency which offers you a series of counseling sessions where you are taught how to draw out a budget and live within your means. A credit counselor appointed to you would evaluate your financial situation and give all advice.
DIY debt relief options
I have also said earlier that some debt relief options are there that you can manage on your own.
Here you go:
Negotiate with your creditors for an easy repayment plan (DIY debt settlement)
If you are having problems handling payments on all the debts, if you don’t have enough money to do that, you can talk to your creditors about it and ask them for a repayment plan. Through the repayment plan the terms and conditions according to which you are required to pay changes as per your affordability.
Follow the debt snowball method
You can repay all your debts on your own by following the debt snowball method. In this method, you need to target the lowest amount of debt and repay it by making a larger amount. You need to make minimum payments on other debts simultaneously. After repaying the first debts, you need to target the second one. This method can be time taking but it helps to boost your confidence.
Follow debt avalanche method
If you are earning well, then follow debt avalanche method to get out of your debts fast. Here. you need to follow the highest interest rate debt and make larger payments. However, don’t forget to make the minimum payments on other debts. Keep making big payments until the debt is paid off. Once the highest interest rate debt is paid off, target the second higher interest rate debt and follow the same method. Since you are targeting the highest interest rate debt, you can get out of all the debts sooner. You can also save money on paying off the highest interest rate debt.
Take out a debt consolidation loan
If you can’t manage multiple payments, then take out a consolidation loan to repay all the debts. Now, you need to manage the single loan properly. However, try to take out a consolidation loan with a lower interest rate. Otherwise, you will lose more on debt payments.
Consider balance transfer method
In this method, you need to transfer the balance to a low-interest card by doing this, you can make the debt payments at a lower interest rate. Hence it becomes easier for you to get out of the multiple credit card payments. In this method, the total amount you have to make as interest payment and principal reduces.
Bankruptcy can be the last option to get out of debt problems
If you are in a huge debt that you can’t repay, then you may have to file bankruptcy to get out of it. If you think that you are not financially capable to manage debt settlement or debt management option, then bankruptcy should be your last resort. Talk to a good bankruptcy attorney to file bankruptcy for a fresh financial start.
However, you should take a lesson from your debt payoff journey. Remember, debt repayment options can take a toll on your credit health. You have to manage your finances well to regain your credit health. Also, you have to manage your credit cards properly. So, learn good financial habits to manage your finances properly to get back a healthy financial life in the near future.