subject: Best Ways To Get Out Of Debt – Debt Consolidation and Debt Settlement [print this page] The simplest way for people to get out of their debts is to cut back their spending on luxury items, and find other ways to reduce their costs, such as switching to cheaper gas, or electricity providers.
However, for many people this is simply not enough. They find themselves in over their heads with repayments that they just cannot keep too.
For people in this sort of situation they need to look at more significant alternatives. These alternatives can be split into 2 different areas.
They are debt consolidation and debt negotiation. In debt consolidation a person takes on a further loan to cover all their existing debts. It allows them to effectively 'consolidate' all their debts into one monthly payment. It means the repayments each month will normally be significantly reduced and at a level that the individual can afford.
They can then slowly continue to pay off what is owed and also slowly improve their credit score whilst the repayments are being made.
This is a good method. However, there are certain disadvantages. The first is that it is not easy to qualify for a consolidation loan. Companies will require collateral, but most people in this situation are not able to provide it. Also the overall debt a person owes is actually increased (with the consolidation fees) so the repayment cycle may take a very long time.
The second method is debt negotiation. In this method an individual works with a negotiation specialist who analyzes their situation and what they can realistically afford to pay.
They then use this information to approach the companies that the person owes money to and negotiate discounts on that money.
The method works because these specialist companies can make the creditors understand that if the situation is allowed to continue the person may go bankrupt and they will end up with nothing.
It then becomes in their interest to negotiate. The method is excellent because it works, and people can save significant amounts off their debts and often pay them off much more quickly than they ever believed possible.
The disadvantage is that whilst the negotiation process is going on, the individual effectively stops all payments, and their credit score can be affected.
However, this will quickly improve one the individual starts repayments at the negotiated amounts.
Best Ways To Get Out Of Debt Debt Consolidation and Debt Settlement
