Feeling overwhelmed by credit card bills, https://worldloans.online/title-loans-nm/ student loan payments or other debts? Seeking out debt relief can help you get your financial obligations under control.
Debt relief can take different forms, and one may work better than another. While seeking debt relief can offer some advantages, there may be cons to weigh in the balance.
What Is Debt Relief?
Debt relief refers to a variety of strategies for making debt easier to handle. What debt relief looks like for you may hinge on the types of debts you have and what you need help with most.
For example, you may need credit card debt relief if you’re struggling to pay off credit card bills. Or you may be interested in debt consolidation if you have several types of debt to pay off.
Credit counseling, debt management plans and debt settlement also fall under the debt relief umbrella. While the means are different, the end goal is similar. Debt relief is about helping people find a workable path for eliminating debt.
How Does Debt Relief Work?
Debt relief works by making it easier for you to reduce your debt burden. The first step is realizing that you need help with managing debts. The next step is choosing a debt relief option.
- Interest rate reductions
- Changes to credit card or loan repayment terms
- Reducing the principal amount owed
- Consolidating debt
- Loan refinancing
Bankruptcy can also be considered a form of debt relief. But there can be significant credit score impacts associated with filing bankruptcy.
When You Should and Should Not Seek Debt Relief
Debt relief may not be right for everyone. So, before digging into the options, it’s helpful to understand who debt relief is suitable for.
- You’re behind on credit card bills or other loan payments.
- You’re not behind on bills yet, but you’re struggling to afford your payments.
- You’ve tried to manage your debt on your own, but you can’t seem to make any progress.
- You’ve contemplated filing bankruptcy.
If you’re still creating new debt, then debt relief alone may not be enough. You may also need to address the spending habits that are keeping you in debt.
Debt Relief Options
Debt relief isn’t a one-size-fits-all solution. There are different ways you can approach it, depending on how much you owe and what type of interest rates you’re paying.
You may choose to consolidate debt if you have several different loans or lines of credit to repay. But what is debt consolidation and how does debt consolidation work?
In simple terms, debt consolidation means combining multiple debts into one. For instance, you may use a personal loan to consolidate debt from multiple credit cards.
Balance transfers are another option for credit card debt relief. In this case, you’d open a new credit card account, ideally at a low or 0% annual percentage rate, then transfer your existing balances to this card.
Consolidating debt means you’ll have just one payment to make each month. It may or may not save money on interest, however. It’s also important to understand the pros and cons of debt consolidation.
Credit counseling involves meeting with a credit counselor to discuss your budget, debt and finances. A credit counselor can review your spending and debts, then help you create a personalized plan for managing both.
Seeking out a credit counselor could be a good fit if you just need some help with creating a workable debt repayment plan. A credit counselor also may help educate you on basic budgeting issues that could have led to your having excess debt in the first place.