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Options for Eliminating Debt

  • September 20, 2017
  • By: Greenpath Financial Wellness

Don’t rob from Peter. Paul has other options for you.

Are you trying to eliminate debt and dig out of a hole that seems to grow deeper by the day?  If you’re struggling with repaying loans and credit card bills, you are not alone. There are options for eliminating debt for you to consider.

Taking control of your personal finances can be the most powerful and liberating thing. It may seem scary or even impossible, but you can do it. What might seem overwhelming to you may actually be a series of smaller problems with manageable solutions.  Here are a few options that may help you get out of debt.

  • Credit Counseling – Credit counseling is also known as debt counseling.  Talking out your budget with a credit counselor can be a very eye-opening experience.  Good credit counselors are compassionate and won’t judge you.  They will go over your situation, create a budget with you, and discuss possible options.  Make sure that you search for a non-profit credit counseling agency, like GreenPath, that will not charge you for a debt counseling consultation.
  • Debt Management Program – It’s possible that a credit counselor will discuss a debt management program (DMP) as an option if you are struggling to pay credit card debt.  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.  This can be a great way to help reduce your monthly payments and total cost.  There is usually a reasonable fee for the DMP ($50 or less), but typically you will still be paying less than what you would be paying on your own.  A DMP can take up to five years to complete.
  • 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.  It is reported on your credit report as “settled,” and you will likely be taxed on the amount of debt forgiven.  Keep in mind that creditors can still move forward with legal action during this time.  It is very important to research debt settlement companies and get all of their fees in writing.
  • Debt Consolidation – This is a loan that combines all of your outstanding debts into one loan.  Typically this new loan will have a lower interest rate and a longer repayment schedule.  So this could lower your monthly payments, but may end up costing you a lot more in the long run.
  • Bankruptcy – Filing for bankruptcy is the worst thing you can do for your credit, and it can stay on your credit report for up to 10 years.  However, if you are facing a dire situation, bankruptcy may be a great way to give you a fresh start.  If this is an option you are considering, talk to a credit counselor first and then see a bankruptcy attorney.

It’s always best to take action on your debt. Even small steps can help you get back on track.