There are four methods to settling your unsecured debt: pay it off completely, obtain help from a debt settlement company or credit counseling agency, declare bankruptcy, or try to settle the debts on your own. Here are some tips for deciding the best way for you to proceed:
Pay It Off Completely
Some people have the money to pay off their debts, but fail to take action because they do not want to take it out of the stock market or other investments.
This is short-sighted because any interest that you are earning in the stock market or your investments is being swallowed up on the debt service on your secured and unsecured loans. Get rid of debt before you invest.
Get Help
Debt settlement companies vs. credit counseling; which is better? It depends on your circumstances.
If you have a solid source of income and have money in the bank, then you can benefit from debt settlement services from a reputable company. But, there are fees to pay for this service.
Credit counseling will help you make a budget and work to get you out of debt. It takes longer, but it does work.
The biggest problem with these two programs is the high drop-out rates. If you drop out, you will be worse off than when you started. One way to avoid this is to have an emergency fund set aside so that you can handle life's unexpected bills without wrecking your debt relief efforts.
Declare Bankruptcy
This option is viewed far too often as an easy way out of debt, but it must be considered only as a last resort.
A bankruptcy stays on your credit record for 10 years and will have serious ramifications for you in obtaining any kind of loans in the future.
Only under certain circumstances should you consider this option. If you are buried under massive medical debt or other loans, and there is no other way that you can pay them off because you are unable to work, then bankruptcy might be the right choice for you.
Settle Debts on Your Own
Each situation is different and because of this, solutions must be tailored to fit you, not the other way around. This is why you should at least consider the possibility of settling your own debts. Armed with a little bit of information and negotiation tips, you can obtain attractive settlements on your unsecured debts. Here is why you should consider this option:
Creditors prefer to settle
You are in command because you hold the money
If you file for bankruptcy creditors lose it all
Collecting money on debts costs money for creditors and collectors
Suing you is more costly than just settling
These work in your favor, but you must have cash-on-hand to be able to pay when you reach a settlement amount.
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