If you’ve previously read about, and already tried lots of different ways to reduce your debt, such as paying off the smallest debt first, or the one with the highest interest first, and variations of many things in between, but your debt mountain just keeps getting bigger, then you’re not alone.
Lots of the available systems can work, but if they don’t, it might not be your fault, but simply that you have too much debt, and the compounding interest is just burying you.
So What Are The Alternatives?
Under other circumstances, a good BBB (Better Business Bureau) affiliated credit counseling agency would be a good option, but if you’re in the situation that’s described above, then they’re not likely to suggest anything other than debt settlement or debt consolidation, with the exception of bankruptcy.
It’s not as easy to file for bankruptcy as it once was, and in nearly every case it should be your last choice of action. Better to at least try debt settlement or debt consolidation first, because bankruptcy will always be available if nothing else works.
Debt Settlement Explained
Debt settlement basically means that the creditor and debtor agree to new loan terms that are more favorable to the borrower and if the debtor sticks to the terms of the agreement then it’s something that’s good for both parties because the debtor pays less, and the creditor avoids forcing him into bankruptcy.
If only one creditor were involved then the process would not be overly complicated, but that’s rarely the case. One of the major difficulties is that every creditor wants to get the best settlement that he can, and he has no interest in the deals that you are attempting to make with other creditors.
What this means in practice, is that every deal has to be renegotiated a number of times before it’s finally signed, and because credit card companies and other lenders deliberately make it extremely difficult to speak to somebody with authority, the whole things becomes almost unbelievably stressful and frustrating.
It is possible of course, to handle the whole process alone and many people try to, but most give up after weeks or months, because of the stress and time involved. It’s particularly hard because you’re personally involved, and unless you’re sure that you can stay the course, then it would most likely be better to have a BBB (Better Business Bureau) company handle the negotiations for you.
Debt Consolidation Explained
Debt consolidation means combining all your individual debts into just one debt, that will cost you less in interest and fees than all the separate debts combined.
It’s important to understand that the debt consolidation route is generally only available to people who still have a fairly good credit score, and if yours is already shot to pieces then debt settlement and not debt consolidation would most likely be the best choice to make.
There are plenty of companies that offer consolidation loans to people with even terrible credit, but they’re usually very expensive, and if you’re still tempted by this route, then be sure to check out all the fine print in the contract.
If however, you’re credit score is still better than poor then a debt consolidation company might be the answer because it will;
a) Carry out all the negotiations, and get the best possible rates.
b) Stop the harassing phone calls and knocks on the door.
c) Arrange for one set amount that has to be paid every month.
d) Remove a tremendous amount of stress from a highly stressful situation.
Whatever you do, please make sure that there are no upfront fees, and check very carefully to see what the repercussions will be if you default on your payments.
An additional upside to debt consolidation is that your credit score will be less affected than if you were to opt for debt settlement, provided you stay the course and don’t default.
The author of this article was a film producer, and award winning film sound editor for many years. He has a major interest and flare for economics, and one of his websites -> Free From Debts is for those that want to get free from debt quickly, and it has information on how to eliminate 90% of your debts by simply sending a one page letter.
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