How to Get Relief From Debt
One of the best things that you can do for yourself is to get out of debt. Debt is very limiting. It limits your earning potential by taking away from the money that you can invest and save. It limits your choices when it comes to changing your career or opening your own business. Debt will constantly hang over you. You need to stop using excuses that justify your debt and do something to change your situation. The only way to get away from debt is to pay it off and stop using credit completely.
Once you have determined that you want financial freedom, you need to set up a debt payment plan. You can say that you want to pay off debt, but until you make a plan and stick to it, you will not go anywhere with it. Many people avoid making a plan because it involves adding all of your debt together, and the numbers can be depressing and scary. However, knowing that you are doing something about your debt helps to relieve those fears and the nagging worry that you may be experiencing.
Student loans have a unique set of payment options. You may be able to defer for economic hardship. You may also have a lower interest rate than on your other debt. You may consider putting your student loans at the back of your debt payment plan, but you should still pay them off. You will save yourself interest payments over the years. You should have the options
Although, you may be looking for an easy solution to pay off your debt you should be wary of a debt consolidation loan. Generally, this loan will move unsecured credit card debt into secured debt (a home equity line). This can be dangerous, because if you fail to make payments you may be in danger of losing your home. You also do not address the reasons that you are in debt in the first place. With a debt consolidation loan you are not really paying off debt, but simply moving it somewhere else.
A credit counseling service is another option that sounds better than it really is. The credit counseling service will show up on your credit report. Credit counseling services also receive funds from credit card companies. There have been many reports of services committing fraud with its clients. Although there are good credit counseling services out there, you can do everything that a credit counseling service does yourself. You need to change your spending habits and focus on getting out of debt. You need to carefully consider all of your options before you sign up for a debt relief firm. They may be able to help you, but not as much as you originally think.
Debt settlement allows you to pay off your debt more quickly. However, it is only an option if you are already behind on your payments. You should not stop making payments just to qualify for debt settlement. You can negotiate with companies to pay a lump sum to pay off your debt as payment as full. When you do this, you need to request a letter that indicates that the payment will count as payment in full before you make the payment. On your credit report, it will state that the debt was settled. This does affect your credit score and history, but not as much as a bankruptcy would.
Bankruptcy as a Last Resort
Bankruptcy is one way to clear up your debt, however, it is not your best option. Often with bankruptcy, you still have to pay off a portion of the debt, and it impacts your credit score drastically. It may seem like the easiest solution, but student loan debt is rarely discharged, and it will affect your ability to qualify for a mortgage in the future. If you find yourself in a situation where you do not see a way out, you will need to go through credit counseling before you will qualify for bankruptcy. You need to completely stop using your credit cards, and you should speak to a lawyer. However, this may not be the solution that you are hoping for. If at all possible you should pay off the debts yourself.
Ultimately, you should take responsibility for your own debt. You can do this by setting up a budget, limiting your spending and following your debt payment plan. You will save money doing the work yourself and you will change your spending habits, which means that you will change your financial outlook. Since you are making sacrifices the changes are more likely to stick than with a quick fix solution. It is also important to realize you are not responsible for paying off your parents' debts unless you cosigned with them on the loan. Make sure you do not cosign as you get out of debt.