How to Settle Debt: 3 Ways to Become Debt-Free
Have you found yourself knee-deep in late payments and debts and are looking for different ways on how to settle debt? If yes, then you need to know that you are not alone. Consumer debts are at an all-time high with the average Joe owning approximately $38,000
There is a bright side to this, which is, you can get out of it regardless of how deep in debt you are in. Without further ado, here are some of the options you can utilize to get out of your current situation
1. Clear the Debt on Your Own
The first, foremost, and easiest way to get out of debt is to clear it up on your own. Usually, the key to doing this is coming up with a plan. Start by outlining all your creditors, how much you owe them as well as the interest rate they charge. From there, note down the accounts you want to pay off first. An easy way to do this is to prioritize creditors with high-interest rates. Now with this list, the next step is to work towards creating the funds to pay these debts off.
You can do this by looking for ways to earn more income. While at it, review your monthly spending, and cut on expenses. This way, you’ll have more money coming in from the jobs you do, and reduced costs. Hence, you’ll have more money to pay off your creditors, and consequently, reducing your debt gradually. Also, avoid creating more liabilities.
2. Debt Consolidation
Clearing debts on your own is a great option. However, it may not work if all your debts are of high interest. This is because the interest will keep on accumulating, leaving you overwhelmed each month. Luckily, there are plenty of choices on how to settle debt that you can use, and debt consolidation is among the top.
Debt consolidation simply involves combining debts from multiple creditors into a single monthly payment. What this means is that you take out a new loan, pay off all your existing creditors, and remain with one single, larger debt to pay off over a promotional period or set term. To do this, you can either take out a 0% interest balance transfer credit card or get a direct debt consolidation loan.
This is usually a great option if you have several high-interest debts as you get to pay them off and remain with one low-interest rate loan. It offers peace of mind as you may get more time to repay it, and at the same time, don’t face the pressure of having to deal with multiple creditors. But, for this option, you need to have an excellent credit score.
3. Debt Settlement
As noted, debt consolidation is only an option if you have a healthy credit score. Therefore, if months of debt accumulation have ruined your score, then it is off the table. The good news is that all hope is not lost as you can always use debt settlement.
With this option, a debt settlement company will often negotiate with creditors on your behalf and come up with a settlement plan that allows you to pay less than you owe. But to do this, you must first enroll in a debt settlement program, set aside a particular amount of money every month so the company can offer it as a lump sum to the creditors. It is a great option, but it may hurt your credit as you’re usually required to stop paying your debts first. The other downside is that defaulting may cause your creditors to become more aggressive and even sue you. But the upside is that when this happens, depending on the company in question, you may get legal help.
Debt can drive you crazy. But as noted, there will always be options on how to settle debt. It all comes down to your current situation. If you’re having problems deciding which option suits you, be sure to consult experts from a well-established company.