Here Are A Few Other Ways to Get Out Of Debt That We Recommend With Caution | If You Cannot Follow through with Caution Then We Do Not Recommend These
If you are careful, these next few strategies can certainly definitely work to help you get out of debt quickly and easily. But you have to make sure that you don’t make mistakes when executing these strategies.
Debt Consolidation Loan
A debt consolidation loan would work perfectly if you consolidated all of your debt into one fixed monthly loan payment at a lower interest rate. The problem with this solution is that if you are not careful you start using your credit cards that you have transferred the balances off of you will start building up debt again.
We have seen it so many times where people have a false sense of security after they have transferred the balances off of their credit cards and have no balances that they can use the cards sporadically again. What ends up happening is you start overspending and you start building up balances on these cards again.
If you are able to hide the cards in a draw and just use one or two for emergencies only and pay down your consolidation loan as quickly as you can with overpayments then this option will work.
This next solution we do not recommend | Why debt settlement is not the best choice to get out of debt
Again, if executed properly debt settlement program can help get you out of debt, but you have to make sure you understand the potential consequences of what could happen strategy there are certainly definitely inherent risks.
Although debt settlement can be an effective strategy, it is not recommended for the weary. When you enter into a debt settlement agreement you’re given the opportunity to pay less than you originally owed on your debt to resolve it but there are drawbacks. Let’s say you have a $10,000 debt and you negotiated a deal to make one payment of $2,500 to settle that debt, on the front and it looks like you got a great deal and only had to pay 25% originally owed. But the drawback is that the creditor will not be fully satisfied and will report this negotiation on your credit report.
How Debt Settlement Works
You hire a third-party debt settlement company to contact your creditors and negotiate payment plans to reduce your debt. Understand that these third-party companies will charge you a fee for doing this when you can actually do it yourself. They then instruct you to open up an account in escrow where you will put money in to pay that negotiated debt. In many cases, the company will instruct you to stop paying your creditors until they can reach an agreement for you.
Then they eventually hopefully may reach an agreement and in many cases, they will not be able to reach an agreement after you have stopped making payments.
As you can see this can backfire on you very quickly because the creditor is going to report the negative activity on your credit reports and will have an adverse effect on your credit and your credit score.
Also when you stop making payments you can incur interest and late fees.
The option of debt settlement is risky but there are times when it can work. If you are successfully able to negotiate your debts you could pay lower debt amounts on each debt and pretty much have the harassment creditors coming after you alleviated.
Be very careful if you are considering debt settlement as an option.
While filing for bankruptcy is known to be a very effective strategy to get out of debt while providing consumers with starting afresh life with a clean slate, it does have its drawbacks.
The first is that when the court issues a public record of your bankruptcy anybody can find out information about you in the future obviously because it’s a public record.
The bankruptcy will also show up on your credit report for a minimum of 10 years. If you already have a really low credit score, then this is not as bad as it looks because you’re going to have to rebuild your credit anyway. But if you have good credit, this will drastically affect your credit rating and trustworthiness, and of course, your score will drop drastically.
Not everybody is eligible to file for bankruptcy. Were just going to list that here as a drawback as well.
You might have to give up some items that you own when filing for bankruptcy. In most cases, you won’t have to but every case is different.
If you file for a chapter 13 bankruptcy instead of a chapter 7 bankruptcy, you’ll probably have to pay back some of your debts on a payment plan.
Still with all of that said, filing for bankruptcy can be beneficial for your situation and can help you to get out of debt very quickly.
Chapter 13 bankruptcy can also help to stop foreclosure.
Huge companies get bailouts all the time. So why shouldn’t you take a personal bailout?
Make sure you consult the laws with a professional before making any decisions. There are different kinds of bankruptcies and there are different kinds of loopholes and situations you may not be privy to.
Make sure you do your due diligence and talk to a lawyer if you are considering your debt settlement or bankruptcy as a solution to getting out of debt.
See our resource on how to get a bankruptcy removed from your credit report.