Getting out of debt is not an easy feat to accomplish. You need to exhibit a significant amount of self control, discipline and determination to reach your financial goals. If you are not committed to this, you may have a hard time to solve your debt problems.
The good news is, there are debt relief programs that will help you take control of your credit situation. They vary in terms of the process, sacrifices and qualifications. Your choice should depend on what your financial capabilities can handle. More than anything you need to understand your finances and the extent of your debt problems for you to be able to find the right solution.
Apart from bankruptcy, all debt relief solutions will take years to complete. Bankruptcy, especially Chapter 7, can take only a few months to complete. However, the repercussions of that may prove to be quite destructive. Your credit score will go down to as much as 200 points. Not only that, you will be given the bankruptcy taint which will stay on your records for the next 10 years. That will make it difficult to get financial aid in the future.
While the other options may take years, you can expect that none of them will take more than 5 years to complete. At least, that is true if you stop acquiring debts and you stick to the program religiously. Here are some of your choices.
First is debt management. This debt solution actually begins with credit counseling. You enroll your debts with a credit counseling agency and you are assigned a debt or credit counselor. Together, you will review your finances to find out how much you can afford to pay every month. They will work with you to create a DMP or debt management plan. This usually spans a couple of years because the counselor will negotiate with the creditor for a lengthy period so you have lower monthly dues. If you avail of the debt management service, the counselor will help in your debt payments by allowing you to make single contributions to them. The fund that is sent to them will be distributed to your different creditors. That way, you don’t have to track every payment and you can concentrate on growing your funds instead.
The other option is debt consolidation loans. This is somewhat similar to the previous option in the sense that it will allow you to make single lower monthly payments. However, there is no counselor involved. You will take a loan that is big enough to cover your other debts. When your loan is approved, you can pay off the other debts and thus have the luxury of having only one, albeit big debt. The thing about this option is you need to get a loan that has a low interest rate. That can be done by either having a collateral or a good credit standing.
Both of these options are loosely categorized as debt consolidation programs. There is another option known as debt settlement. It will provide you with low payments because the debt expert will negotiate with your creditors to agree to a settlement amount that is usually lower than your current balance. Once you have paid this off, the creditor agrees to forgive the rest of your debts. This is more tricky and could damage your credit score – but not as grave as bankruptcy.
If you want to keep your credit score in good shape, your best option is either debt management or debt consolidation loans.