Eliminating one’s debt through the debt reduction options can be complicated. There are several different forms of reducing debt and not any of them can eradicate all of your debt. However, the more you know about debt reduction the better chances you have to pick the right one for you.
True Debt Reduction
There are only two different ways to get truly debt free. You can reduce your debt by paying it down or settling your balances. In order to settle your balance you must contact your creditors and begin to negotiate a reduced price. The biggest pitfall in negotiating with a creditor is that you must have the settled upon amount on hand. When planning to do this it will help if you are a good negotiator.
The Pitfalls Of Credit Counseling
Credit counseling is something that will take a lot of time. The process could take you 5 years or more achieve debt reduction. In that time you will have to surrender your credit cards and ensure to not add anymore debt. Another negative to this approach is that if you were to miss a payment your repayment agreement might be revoked.
Debt Reduction Through Consolidation
One of the most popular ways of debt reduction is through debt consolidation. To eliminate debt through consolidation you will need to find a debt counselor or consumer counseling agency. The agencies are all over the area, however you are able to find good reputable agencies online.
How Credit Counseling Works
When you choose a credit counseling agency you will be assigned a credit counselor. You and a credit counselor will review your spending habits, your debts and your budget. Your counselor will contact your creditors and negotiate reduced rates and fees. When all your creditors agree to the terms you will no longer have to pay your creditors. You will then repay the negotiated balances to the counseling agency in order to complete your debt reduction plan.
Debt Consolidation Loan
Debt reduction can also be accomplished through a debt consolidation loan. Getting a loan, secured or unsecured, you can then pay off all of your creditors with it. After paying your debts a consolidation loan will allow you to make one payment on a loan rather than paying all the different creditors. When looking for a loan make sure to get one with a lower interest rate than what you currently pay.
The Pitfalls Of A Debt Consolidation Loan
There are some pitfalls when considering a debt consolidation loan. The term of the loan used can be an extremely long, ranging anywhere from 5 to 10 years. Another pitfall you will find is continuing to remain debt free. 78% of people end up with even more debt because of continued use of credit offers.
Debt reduction through credit counseling or consolidation loan can be complicated and sometimes stressful. There are several options to consider enabling you to pick the best program for yourself. Remember that even filing for a chapter 7 bankruptcy doesn’t mean that all of your debt is eliminated.