With consumer debt levels increasing for more Americans than ever, some may find themselves feeling overwhelmed. But there are options for dealing with excessive debt out there.
Getting a Handle on Your Finances
The first step any individual should take towards a debt relief program is figuring out their financial situation, and whether they require emergency debt relief. By listing out their income and any expenses they may have, they can gain a greater insight into any behaviors that may make becoming debt-free difficult.
When going over expenses, an individual should divide each into different categories. Some expenses, like rent, utilities, or car payments, will be far more difficult to reduce than others.
The second category should include expenses that are required but have room for cuts, like groceries or clothing. These should be itemized, as there are many potential ways to reduce these expenditures, such as foregoing name brands, or waiting for deals on any higher-priced items.
The last category should include expenditures that are not necessary. This includes eating out, going to the theatre, and any other avenues of entertainment. After cutting extra expenses, an individual can then begin taking steps towards making their debt more manageable.
Talk to Your Creditors
Most legitimate businesses that offer customers a line of credit want it to be paid back. That means that oftentimes when an individual struggles to do so, the business will be willing to adjust the payment plan in a way that satisfies both parties. Potentially, a consumer could receive a lower minimum payment, lower interest rate, and even have late fees waived when certain conditions are met. If, however, the business itself is unwilling to assist, there are other options available.
Work with a Credit Counseling Agency
A credit counseling agency is an organization designed to provide assistance to the average consumer with a variety of financial services. Depending on the specific agency, a certified credit counselor can provide assistance in creating a budget, managing debts, or helping to organize a debt relief program called a “debt management plan”.
With a debt management plan, the counselor negotiates on behalf of the consumer with their creditors in an effort to find a mutually beneficial arrangement between the two parties. When successful, this can result in lower monthly payments, an extended payment period, and lower interest rates.
When looking for a credit counselor, it’s important to ask questions about any fees that may be involved, and whether employees receive any conditional compensation that may represent a conflict of interest between them and the consumer.
One such option is known as debt consolidation. Generally, debt consolidation is most beneficial for those with multiple high-interest loans, as the process involved taking out a loan with a lower interest rate and using it to pay off prior debts.
In many cases, this can allow someone to pay a lower amount over time, and simplify the payment process. Debt consolidation, however, isn’t a one-size-fits-all solution, and a different emergency debt relief plan may be needed.
Debt settlement is another type of emergency debt relief plan that can help eliminate debt from their lives. The debt settlement process involves the cessation of payments to creditors, and instead, sending the payments to a debt settlement company that stores the funds in a secure account.
As this secure account grows, the debt settlement company will begin negotiations with your creditor, using the funds in the account as leverage in an attempt to settle the debt for less than the amount owed.
Like other options for dealing with excessive debt, debt settlement is not without risks, like potential impacts to your credit score while the account grows, but has potential benefits that may well be worth investigating.