Are you having such a hard time with debt that you just can’t see anyway out and that the whole idea of debt relief seems like a joke? Well, it’s not. There are ways that you can get relief from those debts – depending on how much trouble you’re in.
We call this the one- half way to achieve debt relief because it’s based on the fact that most of your debts are credit card debts and that you still have a reasonably good credit score. If this is the case you should be able to transfer the balances on your credit cards to a new one with either a very low interest rate or a 0% interest rate. If you could qualify for a 0% interest balance transfer card you’d not only consolidate your debts but would have anywhere from six to 18 months interest-free. This would give you time to get your balance paid down or even paid off, which would definitely provide debt relief.
1. If you own your own home and have some equity
If this is the case you should be able to get either a home equity loan or homeowner equity line of credit to pay off your outstanding debts. However, you’ll need enough equity for the 80% rule, which is that you will be able to borrow only 80% of your equity. As an example of this if you have $20,000 in equity you’d be able to borrow only $16,000. However, there are several advantages to this beyond the fact that you would have consolidated your debts. For one thing you should have a lower monthly payment than the sum of the payments you’re currently making. And you will have much more time to pay off the loan. In fact, the typical term for a home equity loan is 30 years and for a homeowner equity line of credit 10 years. The downside of this is that because the loan has such a longer term you’ll end up paying more interest
2. If you’re willing to invest five years to get debt relief
A third way to get relief from those debts is by going to a consumer credit counseling agency and getting a debt management plan (DMP). If you choose this option you will be assigned a debt counselor and the two of you will work together to create a DMP designed around the payments you can actually afford to make. Your debt counselor will negotiate with your lenders to get any fees forgiven and for lower interest rates. If your lenders accept your DMP your debts will be consolidated in that you will now be required to make just one payment to the service agency each month. In return, it will pay each of your creditors monthly. Your credit card accounts will be closed and you will not be allowed to apply for or acquire any new debt until you complete your program, which as noted above will probably take five years. But at the end of those five years you will be debt free.
3. If you can make monthly payments for 2 to 4 years
The third or fourth option – depending on how you’re counting – is to have your debts settled. When you hire a debt settlement company such as National Debt Relief you will end up paying only about 50% of what you owe. Your debt will be consolidated because you will now pay just the debt settlement company once a month instead of all your creditors. You may be able to choose from several different repayment programs but regardless of the one you choose it will take you anywhere from 24 to 48 months to complete your plan depending on how much you owe. Last but not least, the debt settlement company will take responsibility for interacting with your lenders and any debt collectors freeing you from those annoying calls.
4. The terribly bad option
The ultimate answer to debt relief is, of course, bankruptcy. Choose to do this and you might be debt-free in less than six months. However, do understand that not even bankruptcy will free you from secured debts like an auto loan or mortgage and certain types of unsecured debts. For example, a bankruptcy can’t discharge student loans, alimony, spousal support, family support and tax debts. Plus, it’s a terribly bad option because of the stain it would leave in your credit reports for 10 years. A bankruptcy might drop your credit score by as many as 250 points making it very difficult for you to get new credit for two or even three years. Having a bankruptcy on your record would probably increase the cost of your insurance premiums and make it more difficult for you to rent a house or an apartment. Many employers now routinely check credit reports before hiring an employee so a bankruptcy in your credit history could even cost you a job.
Think before you leap
As you have seen there are options for getting debt relief. What’s important is that you sit down, compare the alternatives and think things through before choosing one. Compare the pros and cons of each to make sure you choose the one that will fit you best. Depending on the one you choose you might have to live with it for anywhere from two to 30 years so be sure to think before you leap.