Your financial future is important, which is why it’s imperative you tackle your debts now. You have options, even when it doesn’t feel that way. Debt is a downer in every manner possible. It stresses marriage, it makes parenting more difficult, and it can control your life. It’s difficult to live your best life when you owe creditors money, but you don’t have to live this way. You can make life easier by paying off your debts the way that works best for you whether it’s debt consolidation or debt settlement.
What is Debt Consolidation?
Debt consolidation is a great way to pay off your debts. It’s the act of consolidating many debts into one big debt. It works well for anyone with good enough credit to take out one big loan to pay off all your smaller debts. By eliminating numerous interest rates and numerous minimum payments due each month and turning your debts into one big debt, you can pay it off faster and without as much expense.
- 0% APR balance transfer credit cards
- Personal loans
- Home equity loans
- Debt consolidation loans
These are some of the best methods of debt consolidation. By applying for a credit card with a long 0% APR introductory period, you can transfer balances and eliminate interest while you pay off your debt. If you can apply for a loan from the bank, you can have one large debt with a much lower payment and interest rate to pay your debts. This makes debt more manageable, easier to pay off, and it makes it less expensive to pay.
What is Debt Settlement?
If your credit isn’t stellar, this might be an option for you. It’s not anyone’s first choice, but it’s an option for those who are already behind on their credit card payments and their finances. Debt consolidation companies work with you to lower your payments and interest rates. The company asks you to provide them with your debt information, and they communicate with your creditors to lower interest rates, lower payments, and work something out. You then make payments to the debt consolidation company and they settle your debts with your creditors for less than you owe.
The problem with this kind of loan repayment is no creditor is legally obligated to work with you. They might make a decision to ignore your requests to settle a debt for an amount less than you owe. They might make it their goal to handle your debts by asking you to continue to pay, and you might not be able to consolidate all your debts into one payment. Debt settlement programs also lower your credit score significantly, but can raise it significantly when you’re finished repaying your debts. It’s a great start for anyone, but it’s not the first choice most people have when it comes to repaying their debts.
Both types of debt repayment work for many consumers, but they both have pros and cons. The most important thing to consider is the total cost of your debt. How can you pay off your debts as quickly and for as little as possible without affecting your credit score too much? It’s also worth considering how to handle your credit and debts once they’re all paid off. Many consumers are quick to cancel credit cards the moment they’re paid off so they eliminate the opportunity to go back into debt. By doing this, you can affect your credit score negatively. You must have old credit accounts to provide credit reporting companies with a long credit history. It’s important to understand how credit works, how debt affects you, and how becoming debt-free can change your life.