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Negotiation and Settlement >> Debt
Solution
With the various options a debtor has in this era,
debt solution is an easier task now. There are numerous ways to fight
your debts and win over them. With planned and calculated move, better
days are not far away. This is, however, dependent on the amount and the
type of debt you are undergoing. The twelve most popular ways of debt
solution are:
- Self
Repayment Plan
- Debt Settlement
- Debt Consolidation
- Debt
Consolidation Loan
- Credit Counseling
- Cash out Refinance
- Retirement Benefits
- Credit Union
- Home Equity
loans
- Insurance
- Credit Cards
- Bankruptcy
These are 12 golden guidelines to solve your debts: - Self
Repayment Plan: The ideal way to start your debt solution program is with
the self repayment plan. You can do it yourself without the help of any debt consolidation
company. With calculated steps you can overcome your debt problems within a considerable
time period. Budgeting is also a very important aspect in the self repayment plan.
Make a budget plan and curtail any unnecessary expenses. If possible, you might
also consider a part-time job. These funds can be utilized in your repayment plans.
If personal discipline is a problem you can set up direct payroll deposit and
automatic payments with your bank. You will have no choice but to follow the plan.
- Debt Settlement: With debt settlement, a third party
or you yourself negotiate with your creditors to reduce the debt amount. Debt
Settlement agencies work with your creditors to reduce your debt balance, sometimes
by as much as 50-75%. Most debt settlement companies are transparent about their
fee structure but you are advised to check out if there are any hidden fees involved
in the settlement process.
- Debt Consolidation: Debt
consolidation is a very beneficial process to solve your numerous debts. Here
your multiple debts are consolidated into a single amount. On approaching a debt
consolidation firm the consultant first analyses your present debt amount. The
debt consultant then negotiates with the creditor on your behalf and reduces your
debt amount to around 30%-60%. In most cases interest rates are reduced. Late
fees and hidden taxes are also waived at times. The revised consolidated debt
amount is divided into easy monthly installments that make your repayment plans
much easier.
- Debt Consolidation loan: The debt consolidation
loan helps you in combining all your outstanding debts in one loan account. For
example, you may have an existing loan with a balance of $2,500 (15% interest
rate), a credit card balance of $1,000 (12% interest rate) and a store card balance
of $500 (10% interest). These could all be consolidated into one loan of $4,000
(8% interest). The purpose is to actually reduce monthly repayments. Either the
interest rates are lowered on the new loan, or the repayment period can be extended.
- Credit Counseling: Credit counseling agencies help
you to be debt free, but basically they don't consolidate your debt. They will
work out payment plans with lower interest rate and fees for your outstanding
debts. You'll make one monthly payment to the counseling agency, which will pay
all your creditors. Credit counseling programs usually does not hamper your credit
rating. If you stick to the plan, it is possible for you to be debt free in three
to six years. Careful measures are required while choosing the agency.
- Cash
out Refinance: In this process it is required to refinance your home and pay
your outstanding bills. It also helps you to tap the equity of your home. Refinancing
at a lower interest rate, will help you to eliminate the high interest costs of
the debts you pay off. You can even chalk out a lower payment plan compared to
the present one. You need to have a clear understanding of the total cost of refinancing.
- Retirement
Benefits: If you have a 401(k), plan or certain types of pension plans, most
employers allow you to borrow against your retirement account. Borrowing is a
better option when compared to withdrawal of money from your account. This will
save you from paying extra taxes and a 10% penalty. If you can't pay it back within
five years, the IRS will assess taxes and penalties. In case you lose your job,
you have to pay back the loan immediately and pay taxes for pre-mature withdrawal
of money. This type of loan offers low interest rates and is much easier to handle.
- Credit union: Credit unions generally have lower
interest rates and fees on loans. If you're not a member, check with your employer,
or organizations of which you're a member and find out if you're eligible to join
one.
- Home Equity loans: Home equity loans allow you
to borrow against the value of your home, without any other mortgages. It is a
fixed amount of money for a particular time period. In most cases these loans
offer attractive rates and low payment schemes. The interest is usually minus
tax if you itemize. However, interest rates are often variable, and there is a
risk of losing your home if you fail to pay.
- Insurance:
You can borrow from the life insurance policy at a very low interest rate in order
to solve your debt problems. The most advantageous thing is that, you do not have
to repay this loan. Your life insurance benefits will be reduced by the amount
you borrow in addition to any accrued interest.
- Credit
Cards: Using credit cards is advantageous from the point that with a good
credit rating, you may get a much lower rate when compared to other forms of consolidation
loans. Contact your current issuer to ask what interest rates they will offer
you if you transfer balances from other cards over to theirs. Request for a fixed
rate and if they agree, request them to waive any transfer fees. If you can't
negotiate a low rate with your current issuer, try shopping for a new card. Once
you do consolidate this way, be sure to set up an optimal payment plan so that
you can be free of debts within 3 to 5 years.
- Bankruptcy:
Bankruptcy should be your last option in the journey towards debt solution. Sometimes
when financial pressures are enormous and you fail to meet ends, you might have
to file a bankruptcy. It is a temporary relief under the debt burdened conditions.
Bankruptcy creates a negative impact on your credit report for the coming ten
years and marks you as a bad applicant for future job prospects and loans. The
two types of bankruptcy that are most popular are: Chapter 7 and Chapter 13. The
first priority of a debtor is to try out the above mentioned ways and avoid bankruptcy
rather than filing it.
Following the above methods carefully will
give you a debt free life, a secured bank balance and peaceful nights away from
the harassing phone calls from the creditors. Bank on us and we will give you
the fastest, safest and smartest remedies of debt solution.
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