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Living with debt can feel like a nightmare. Between the financial strain of keeping the lights on and the constant calls from bill collectors, the stress can be enough to break any of us.
Here’s the good news: There is hope.
If you’re starting to fall behind on your debt payments or even unable to pay them at all, you have options. Whether you are struggling with thousands in credit card debt or you simply need a way to streamline your monthly payments, it is possible to get ahead of your debt and start enjoying life again!
Here are four of our favorite debt solutions for dealing with debt. Find the one that fits your situation best, and get started putting your debt behind you today!
#1) Struggling with $20,000+ in Credit Card Debt
Best Solution: Debt Relief
Recommended Resource: Freedom Debt Relief
If you are struggling to make payments on more than $20,000 in credit card, personal loan, or other unsecured debt, this leading debt relief program could be your best option. Not only could this method significantly reduce the amount you owe, it could immediately reduce your monthly expenses.
Debt relief, also known as debt settlement and debt cancellation, involves negotiating with your creditors and asking them to forgive a large portion of your unsecured debt. Through negotiations, creditors agree to settle for less and consider the debt paid. Once settlement terms are agreed to, the creditor is paid, and your account with them is considered paid off.
It is possible to negotiate a debt settlement yourself, however, it takes a ton of time, energy, and phone calls to get this done. And it’s not always clear who to talk to in the first place, or what to say.
That’s why so many people use a debt relief company like Freedom Debt Relief to advocate on their behalf. Having a professional debt negotiator work directly with your creditors saves you time and hassle, and is likely to result in a better settlement that you could negotiate on your own.
Having served over 750,000 people since 2002, Freedom Debt Relief is the largest and most trusted debt relief company around. And their customer service is second to none. When you select FDR, they start by giving you a dedicated, IAPDA-Certified Debt Consultant who provides a thorough review of your situation to ensure the program is the right option for you. Then, they customize an affordable plan designed to immediately reduce your monthly expenses and get you great settlements with your creditors.
Keep in mind, however, this solution could impact your credit. To encourage creditors to settle for less than the full amount owed, you need to stop paying your bills for several months, which will likely negatively affect your credit score. However, if you are already behind on your payments, your credit score may already be in trouble while your debt continues to grow. Therefore, if you care more about getting out of debt than improving your credit score, Freedom Debt Relief is worth exploring.
#2) Managing Less than $20K in Credit Card Debt
Best Solution: Consumer Credit Counseling
Recommended Resources: Local nonprofit credit counseling agencies
Utilizing a consumer credit counseling agency is another way to get help with your debt. As with using a debt relief company, going through credit counseling means you will have somebody to help you through the process. The downside, however, is that consumer credit counseling often takes several years before your debts are paid off. According to the Federal Trade Commission, it could take up to four years or more to complete a program.
When you work with a consumer credit counselor, the agency will analyze your financial situation and create a plan for how much you can pay each month. This is called a Debt Management Plan (DMP). The agency then negotiates with your creditors on your behalf. Once an agreement is reached, you send a single monthly payment to the credit counseling agency rather than to your individual creditors.
The best consumer credit counseling agencies are nonprofits. Don’t let the idea of a “nonprofit” fool you, however. Before choosing a credit counseling agency, it is important to understand any fees they charge. It is also important that you do your due diligence to ensure that the agency is legitimate. Research local nonprofit agencies first, and always check with your state’s consumer protection office prior to making a decision on either a debt relief of consumer credit counseling company.
#3) DIY If You Can Afford More than Minimum Payments
Best Solution: Self-Pay Method
Recommended Resources: Zero-based budget, debt snowball
Tackling debt on your own is difficult, but it can be done. Keep in mind, however, this method takes some serious dedication and discipline.
If you are up for the challenge, start by creating a zero-based budget. When struggling to overcome debt, a budget is your most important tool. Regardless of which debt repayment method you use, getting on a budget is going to pay huge dividends toward improving your financial health.
So, what is a zero-based budget? This is a type of budget that helps you create a plan for every penny you earn each month. Using your existing bills, simply divvy up your total earnings into saving and spending categories. Keep going until your income minus your savings and expenses equals zero. Then, track your actual spending throughout the month to help you stay on track.
We think zero-based budgets are awesome because they give every dollar you earn a purpose. As a result, you tend to become far more intentional with your spending and less likely to make impulse purchases. Zero-based budgets also provide a clear picture of where you are currently spending each month, allowing you to see the holes in your budget. They help you control your money instead of letting your spending control you. We have been using a zero-based budget for years, and we absolutely love it!
In addition to a budget, subscribing to a debt payoff method also helps. Our favorite way to pay down debt quickly is called the Debt Snowball method. With this method, order your debts from smallest to largest. Then, pay the minimum amount on all your debts except the smallest. Use your zero-based budget to account for your monthly bills, then take any additional funds and pay extra on your smallest debt. Continue doing this until the smallest debt is paid off. Once you have eliminated it, repeat the process with the next smallest debt.
Like rolling a snowball that continues to get larger, you’ll be able to pay more and more toward your debts until they are all eliminated. The Debt Snowball provides quick wins to keep you motivated while heling you to steamroll your debt at warp speed!
#4) Seeking to Streamline Your Monthly Debt Payments
Best Solution: Debt Consolidation
Recommended Resources: Debt consolidation loan, balance transfer credit card
If you need a little extra breathing room to make payments on your loans, debt consolidation may be able to help. By consolidating your debt into a single loan, you may be able to reduce both your interest rate and the size of your monthly payment.
Debt consolidation involves moving several of your debts to a new single loan or line of credit. This can be accomplished through either a balance transfer credit card or a personal loan. Should you choose the personal loan route, depending on your lender, you may need to seek out a loan specifically for debt consolidation.
With debt consolidation, the idea is to move your existing debt to a new loan which provides a lower interest rate, longer repayment terms, or both. This will reduce the amount you owe each month, allowing you to pay off your debt faster. The new loan replaces the old, so you will only need to make one payment instead of multiple payments to various lenders.
Remember that consolidating debt does not mean your debt is paid off. You have simply moved your debt from one creditor to another. It is also important that you do not use debt consolidation to rack up even more debt. Doing so means you could make your situation worse rather than better.
Although you can attempt debt consolidation on its own, for the best results, try using it in combination with one of the other methods suggested on this list.
Paying off debt takes more than a one size fits all approach. Everybody’s financial situation is different.
The debt repayment method you choose depends on a variety of factors — including the amount of debt you owe, whether you are behind on your payments, how quickly you want the problem resolved, and more. Should you find yourself struggling or unable to make your payments, consider the debt solutions listed above.
It is our sincere wish that this piece has shown you that hope still exists. By taking action and using the right tools, you can create a debt-free future for you and your family. Good luck and thanks for reading!