Choosing the right options for debt relief is very important to the task of getting back on your financially feet. Since there are a number of different strategies that work well in different scenarios, identifying the best option or set of options will depend greatly on your individual circumstances. In some cases, it may be possible to obtain relief with the aid of partial or total debt forgiveness on the part of some of your creditors, or be able to establish repayment plans that freeze the accrual of interest and allow you to retire the debt sooner rather than later. A debt consolidation loan may also be the best of all options for debt relief.
When looking into the processes of debt reduction, working with your creditors is crucial to the process. Depending on your individual circumstances, some creditors may be willing to reduce the amount you owe and also stop applying interest to the balance if you agree to pay off the remaining balance within a given period of time. For example, a credit card provider may agree to waive interest charges dating back for a certain period, resulting in a lower outstanding balance. At the same time, the provider may agree to not charge any additional interest if that balance is retired with a short series of payments over the next few months. This method, sometimes known as a debt settlement, is one of the more common options for debt relief, although there is a good chance the credit card account will be closed to future purchases even after that balance is retired.
Another of the more popular options for debt relief is known as debt consolidation. In this scenario, a third party provides the funds necessary to pay off all your outstanding debt, usually with a loan carrying a competitive rate of interest. The benefit to this approach is that you have only one monthly payment to manage, making it easier to occasionally make an extra payment and pay off the loan sooner rather than later. When the interest rate on the debt consolidation loan is lower than the interest rates on those other debts, you save even more money using this strategy.
Several other options for debt relief are common. Debt forgiveness may be partial or complete, with both approaches effectively reducing the amount you have to repay. Options of this type may be especially helpful if you are not working due to illness or an inability to find another job, and simply have no income to honor the debts. Keep in mind these options can further damage your credit and should only be employed if there is no other option. Typically, going with options for debt relief such as obtaining a consolidation loan will not harm your credit, but will show up on your credit report as paying off all the outstanding balances. As long as you can refrain from running up new credit balances while paying off the consolidation loan, and you have enough income to manage the monthly payment on that loan responsibly, this may be your best bet.