Debt is problematic financially because it reduces the amount of disposable income you have for necessities, saving for the future and emergencies. Typically, individuals and organizations won't pay your debt off for you, but it's possible to get financial assistance in other areas like utilities so that you can put more of your own money into debt payments. Debt counseling and negotiation also helps restore your financial footing.
Negotiation
Help with paying off debt starts with your creditors and lenders. Many will give you a lower interest rate if you call and ask, depending on your credit score and payment history. Some companies also let you work out a payment plan, although they may freeze your account until you've brought it current. If you can show it is in the creditor's or lender's best interest, they may agree to put your debt into forbearance or may settle and forgive some or all of what you owe. Creditors and lenders often offer debt counseling and debt management programs. These programs are just as much of a benefit to them as they are to you. Once you are back on track, you can keep making payments and spending, and the company keeps making interest.
Your Bank
Financial institutions like banks have trained debt counselors and loan officers on staff. Many of these workers will sit down with you free of charge to look at your situation, although it's best to have an account at the bank first. Your bank can provide refinancing or consolidation help or set up automatic deposits and withdrawals with your creditors and lenders so you don't miss debt payments. You may need to pay higher interest or use collateral if you apply for a loan with poor credit, but your credit score may improve if you can use the loan to pay off credit accounts in full.
Available Aid
The government has programs available that address debt planning and budgeting, such as those available through the Federal Trade Commission. These are free in most cases. You also can go to your local Department of Health and Human Services (sometimes listed as Family Services) and apply for relief programs like food stamps. Representatives will gather basic information about your income and debts to determine the programs for which you are eligible, so you can set up an appointment even if you aren't sure what type of aid to ask about. If you aren't working, you may qualify for unemployment or disability benefits. Your local Chamber of Commerce also can give you a list of charities and nonprofit businesses that will counsel you or provide donations that can relieve your financial burden. Churches and hospitals also know of community programs that help. There even are attorneys who will give you free legal advice and represent you in debt-related issues. You can find these attorneys by contacting your state bar association. Friends and family may also be willing to loan you some money or other supplies.
Consolidation, Debt Management and Debt Settlement Companies
Consolidation companies may help your debt situation by giving you a new loan to pay off your debts. This doesn't reduce your debt-to-income ratio, as you still owe the consolidation company, but you usually can get a lower interest rate or a loan term with lower monthly payments. Debt management companies take the money you'd pay creditors and pay on your behalf, usually for a fee. This may be a good option if you have trouble staying organized about your debt. Debt settlement companies work with your creditors to negotiate lower interest rates, forbearance or debt forgiveness. Settlement can hurt your credit score because you don't pay according to your original agreement, but it reduces what you owe.
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