Factors to consider before choosing to help you get out of debt

Debts are normal in life however when they spin out of control they can be disturbing and scary. Debts can accumulate for various reasons some within our control others totally out of our control they include; student loan debts, credit card debts, leaving beyond your
means, auto loan debts and high medical bills. This are some pointers that you need a practical debt solutions immediately; You can no longer fulfill your financial obligations, you want to be out of debts, you have no idea how to get out debts and you cannot afford to pay any of your creditors.

5 factors to enable you get out of debt

Weigh each debt solution seriously and consider at its pros and cons and then choose one that benefits your situation best. If possible consult an expert to help you come up with the best debt solution for you. Some of the factors to consider;

1. Monthly payment

Pick a solution within your budget. How much money are you required to commit monthly will tell you if you can afford to repay your debt without defaulting.

2. Time

Which time frame of repayment suits you best. If you want to clear your debts quickly pick a solution with a lower repayment plan. If you need a longer time to meet your financial obligations choose one with a longer repayment commitment.

3. Impact on your credit score

If your credit rating is still good it is better to maintain it that way thus choose debt solution that does not damage it like self repayment or debt management. Avoid debt settlement and bankruptcy.

4. Account status

If you would prefer to at least maintain one credit card for emergency choose a solution that allows you to keep an account open. Some solutions require you to close all your accounts i.e. Debt settlement.

5. Cancellation policy

Choose a debt solution that allows flexibility one that you can drop in case it is not working for you and you need to switch to another. Some solutions cannot be reversed i.e. Debt consolidation while others can be undone i.e. debt settlement.

Some common solutions to get you out of debt

Debt settlement

It involves you paying a sum less than you agreed with your creditor. You can negotiate this on your own or through a debt settlement company. If you have a lump sum amount it is better to go straight to your creditor and pay the amount there and then and be done. However, if you do not have it the debt settlement company requires you to pay an agreed amount of money each month so that they can settle your debt. It is a good solution if your financial situation is really bad because it destroys your credit score.

Debt management

Here you seek help from a credit counselor/expert who will analyze your financial situation and debts. They will then advice you on the best debt solution for you and help you make a budget so that you can be able to pay the debt soon. When you are spiraling in debt they negotiate with credit issuers on your behalf to lower the interest rates and cut on the penalties.

Self repayment

It requires a lot of sacrifice and discipline but it is the best method if you can afford it. It will require you to dig into your savings and stop overspending. All your money should go towards clearing your debts so no investments can be made. In reality if your
debt interest rates keep accruing you will pay more than what that investment will earn you.

Home equity loan

A type of loan where you borrow money against your equity value. The value of your equity is calculated by deducting the outstanding balance left on your mortgage from the market value of the home. This is the actual amount you would have if you sold your house and repaid the mortgage. This loan helps you get the money you need without having to sell your property. These loans mostly offer attractive rates and low payment schemes thus giving you ample time to clear the debts and repay the home equity loan.

Credit card balance transfer

If your credit rating is good then you can ask for a lower interest rate from your credit card issuers. Contact them and ask what their interest rate will be if you transfer your credit card balances to their credit card. Negotiate a fixed rate and a waiver of any processing or transfer fees. If you are unable to negotiate a lower interest rate with your credit issuers consider getting a new credit card from a new issuer. Transfer all your credit card balances to the new card. Set up an optimal payment plan and be disciplined in paying it so that you clear the debt quickly.

Debt consolidation

In this method all unsecured debts are combined into one single loan that is more favorable and convenient to pay .It can be done by using debt consolidation loans. The loan will be used to pay the accrued debts and then you are left repaying the single loan.

There are many debt solutions not listed above like bankruptcy, ostrich method, cash out refinance, insurance, retirement benefits and credit union. It is better to get out of debt fast if you hope to secure a financially solid future.