Debt Solutions - Understanding Your Debt Relief Options

When personal debt starts stacking up to the point where you feel overwhelmed or even hopeless, take a deep breath and research the many forms of help for people in similar situations.  You are never without debt relief options.  The tricky part is weighing the various forms of debt help in order to deduce which one works for your current situation. 

Whatever type of debt relief option you choose depends on a number of factors including the extent of your debt, your current income and your credit score.

The Types of Debt Solutions

When searching for the best possible debt help, these possibilities should be considered:

Credit Counseling

This should be a first choice for debt help.  Credit counseling involves you working with a credit counselor to examining your current financial situation and creating a game plan for repaying your debt.  Your counselor will provide you with a number of organizational tools which make money management and debt repayment easier to accomplish.  Credit counseling in its basic form will not affect your credit and thus should be tried before any other debt solutions.

Debt Management 

Debt Management plans allow you to combine all your debts into a single monthly payment, typically with lower interest rates. A debt management company offers creditors reassurance that a debtor is making an honest effort to repay their debt in full which makes the creditors more willing to negoiate terms that will help in the effort.

Debt Consolidation Loan

With this plan, your personal debts are all combined into one loan with one payment.  You will need to apply for such a loan and bad credit may hinder that process.  A debt consolidation loan will also affect your credit negatively.

Debt Settlement

This debt relief option should only be used as an alternative to bankruptcy.  Debt settlement involves an outside company negotiating down the amount of debt you owe to various institutions.  This process can help reduce the amount of debt you owe by up to 60%.  This process can take months to complete and will put a big damper on your credit but is still a far better approach than bankruptcy.

Bankruptcy

When debt is so severe that you can prove to the government that you are not financially able to pay the sum back in any manner you can file for bankruptcy.  Bankruptcy is crippling credit wise for 7-10 years.  You will not be able to receive loans of almost any kind and even things as simple as renting an apartment can be very tough.  Bankruptcy should be avoided if at all possible.