Get out of Debt Options
September 20, 2008 by admin · Leave a Comment
What choices do I have for Debt Reduction?
DEBT CONSOLIDATION
Entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.
Source: Wikipedia.
There are actually several different methods that fall under this category. The over all goal is to consolidate all your debt into one payment you can afford. This can be done with a loan, using equity lines, credit counseling or through Bankruptcy. Be very careful with these methods as some will devastate your Credit Rating.
Read more about Debt Consolidation at Have Good Credit.com
DEBT SETTLEMENT or DEBT NEGOTIATION
A debt settlement is an agreement between a debtor and a creditor to fully satisfy a debt for a reduced payoff amount. A debt settlement is usually reached when a debtor is unable to fully meet his/her debt obligations due to financial hardships and attempts by the creditor to collect on the debt have failed. The creditor agrees to cancel part of the debt and accept the remaining sum as full repayment. Debt settlement is also called debt negotiation
Source: Wikipedia.
You make an offer to your lender to pay off 30% to 50% the current balance you owe. This is pre-collection agency. This process can take 6 months or more and it’s not for the weak of heart.
Read more about debt settlement at Have Good Credit.com
DEBT SNOWBALL or DEBT ROLL-UP
The debt-snowball method of debt repayment is a form of debt management that is most often applied to repaying revolving credit — such as credit cards. This method has gained more recognition recently due to the fact that it is the primary debt-reduction method taught by Dave Ramsey.
Source: Wikipedia.
The overview for this program is you pay more a month than your monthly minimum on one debt while you stay current on all your other debts. You start applying the extra money every month to the smallest balance, and once that balance is paid off you apply all the money from that debt to the next largest balance. This will create a snowball effect in paying off your debt. It is very important that you pay the minimum on all other debts to keep all your accounts in good standing and not create more debt by paying late fees.
Read more about the Debt Snowball Method at Have Good Credit.com
Which Method is Right for you?
Every person’s circumstance is different. But we have found the best way to get out of debt with out trashing your credit is by using the debt snowball method. Here is a short list of the pros and cons of this method.
Like any matter that involves your finances you should first check with a CPA and or Attorney before taking any action. We are not a lawyer or a CPA so do not take this information as a guidance for your financial situation. This is simply an informational site and we are NOT offering any legal or financial advice!
Pros:
- Legally and ethically reduce your debts.
- Does not destroy your credit
- Helps you budget your household income
- Learn wealth building habits
Cons:
- Takes time and discipline
- Not a quick and easy solution
- Must create and live by a budget
- You must be really motivated!
There is a very in-depth write up on how the debt role up AKA the snowball method works. You will find out with examples how to create a debt snowball to get you out of debt fast. Some people on the net are selling this exact information for hundreds of dollars but it’s free at Have Good Credit.com so head over and check it out.
Read more about the Debt Snowball Method at Have Good Credit.com
