More and more people these days are finding themselves struggling with debt. While there are a lot of options to help people get back on their feet, none of them make the process truly simple or easy. It’s up to you to take a hard look at your situation and figure out the solution that works for you, even if it takes work. If you’ve got a decent credit history or happen to own a home, things will be less difficult for you. If you don’t fall into those categories, things will be rougher, but not hopeless.
First you can contact a debt management service or a consumer credit counseling service to help you with your debt. By doing this you are taking your first steps towards financial freedom.
A debt management service works by becoming a middle man between the creditor and you. You will pay them a monthly fee and they will forward the payment to the correct creditor. Before you choose a service you should ask them what will happen if some unforeseen financial emergency arises and you miss a payment. This way you will not be surprised if you do encounter this problem. If going the debt consolidation loan route is not right for you there are other options available.
The two major kinds of debt management services are debt consolidation and debt settlement. They work in different ways and are meant for different situations, so you need to do your homework and figure out which one best applies to you. Using the wrong one could be a financial disaster.
If you’ve gotten yourself into debt in a variety of ways, but feel like you could pay it off if only you had a little immediate leeway, you might want to try for debt consolidation. Debt consolidation is a service that rolls all your debts into one big package, and tries to reduce the immediate expenses involved with paying various rates and fees.
However, there are some pros and cons that go with a debt settlement. It is a good alternative to bankruptcy, the payments are generally flexible, and you can settle within three to five years.
Unlike debt consolidation services where the customer still pays the full debt, debt settlement firms cancel a large proportion from the full debt amount. This can be up to 50% such that if you have a total debt of $60,000 the debt settlement service can help you pay only $30,000.
Be careful when using debt settlement, though. It’s no magic bullet to cure all your problems! The end result of debt settlement is that you have a worse credit score in exchange for the money saved. Because of this, settling your debt is usually a last resort. However, it can be just what you need if you’ve tried everything else and are at the end of your rope.