Part 1 -Day 10: Dealing With Debt
- November 10, 2018
- By: Greenpath Financial Wellness
If you are dealing with debt, know that you are not alone. In fact, 4 out of 5 Americans are currently in debt. Let’s work together to figure out how you can eliminate that burden. Today’s article will provide some great tips on how you can pay off your debts.
What are your options?
Balance Transfer – A new credit card that allows you to transfer over existing balances providing you a lower interest rate.
- You have a new credit card with a lower interest rate.
- Transfer fees may apply
- Low interest rate may only be for a limited amount of time
Debt Consolidation – A loan that combines all of your outstanding debts into one loan.
- Accounts remain open
- Lower interest rate
- Smaller Payment
- Credit Score
- Debt to Income Ratio
- Other lending requirements
- Terms of the loan may result in more interest being paid over the course of the debt
Debt Management Program – The way a DMP works is you make a deposit to the credit counseling agency and they pay your debts for you. Creditors often agree to lower your interest rates and payments. A DMP provides a long-term solution for dealing with debt.
- Typically reduced monthly payments and interest rates
- Payoff timeframe of 5 years or less
- Structured repayment
- Ongoing support
- There is usually a reasonable fee for the DMP ($75 or less)
- Accounts have to be closed
Debt Settlement – Unlike a DMP, where your debt is paid in full, debt settlement attempts to settle the debt for less than what you owe. Creditors will usually only settle debt that is severely delinquent.
- Accounts are resolved quickly
- Debts are reported on your credit reportas “settled,” and you will likely be taxed on the amount of debt forgiven
- Creditors can still move forward with legal action during this time
- Settlement companies generally charge large fees
Bankruptcy – I am not an attorney and this is not legal advice. In my opinion, filing for bankruptcy is a big decision and should be considered a last resort.
- Can potentially stop a garnishment
- Could potentially slow/stop a foreclosure
- Bankruptcies can report on your credit for up to 10 years
- Bankruptcy could impact job opportunities or security clearance
- Bankruptcy could impact housing opportunities as a result of the impact to your credit
If you want to develop a personalized action plan for your debt, contact GreenPath Financial Wellness and speak with one of our financial wellness experts at 1-800-550-1961. We offer a free counseling session to go over your situation and we will walk you through your options. If you would like to set up a debt management plan, we can help lower your interest rates and monthly payment.