Getting into debt is easy and getting out of it again can be a very difficult, slow, uphill climb that is full of pitfalls and mudslides. One of the biggest challenges when trying to get out of debt is figuring out which of the many debt solution options available will actually help you the most in the long run. Too popular ways to address debt are debt settlement programs and debt counselling. In order to understand which one is best for you, lets’ take a look at what each one of these entails.
Credit counselling services are mandatory in personal bankruptcy cases but many people want to avoid going that far. The first consultation will often be free with the counsellor’s fee included in your settlement. Trustees’ fees are regulated by the government so be sure you go to a certified credit counsellor in order to avoid being taken advantage of and overcharged. A counsellor can help to lower your overall debt by negotiating for lower interest rates or arranging a low-interest debt consolidation plan with a bank but this is often little more than a reorganization of debts and may not do much to help you get out of debt fast. Debt management plans will be established based on how much you make and how much you need for day-to-day living expenses.
Debt Settlement Programs
These programs reduce your debts by seeking a settlement with your creditors and lenders in which they agree to allow you to pay a reduced amount as satisfaction of your debt. It is in the best interest of lenders to agree to these terms rather than face losing out completely if you file for bankruptcy. This option will usually only be available on delinquent accounts and will have a negative impact on your credit score but is better than filing for bankruptcy or spending years and years remaining in debt. Debt settlement programs are a great way to get back on your feet and prevent falling into an endless cycle of accruing more debts while trying to pay the old ones off.
5 Tips for How to Tackle Debt
1. Break it down into small, detailed steps and set reasonable goals. Work on clearing one or two at a time and start with those that have the highest interest rates.
2. Get better at bookkeeping. Developing a budget and keeping track of your costs is a crucial step in preventing future debt.
3. Prioritize loan payments and credit cards which often have the highest interest rates.
4. Earn more. Budgeting has am upper limit so taking on extra work where possible is an ideal way to help pay off your debts more quickly.
5. Think long-term. Don’t spend all your income paying off debts or you will just have to use your credit cards again before your next payday. Invest when you can and put every extra dollar into savings to prevent future reliance on credit.