Debt is no longer just a national problem; it is one that’s faced by almost 90% of the households, thanks to credit cards. Each month, individuals plan to pay off their credit card balance in full, but end up shopping more than necessary, which adds onto the balance. There is a huge number of people who have become in this deadly cycle of debt because of the increasing cost of living, stagnant incomes, unexpected life events and undisciplined spending. Debt management becomes almost impossible because creditors charge extremely high rates of interest on loans. There are some options that can be used by individuals for reducing their debt to make it manageable and then eventually getting rid of it.
Every option is unique in its own way and people can decide on a suitable method after learning the facts about each. Some of the popular options available are:
• Mortgage Refinance
Individuals can consolidate their debt through home equity loans or mortgage refinance. This particular option is the best solution for individuals when they don’t just want to lower their interest rate, but also reduce their payments as well. However, they should only choose this option when they are sure and able to make regular payments without accumulating more debt through credit cards or other sources. It is essential for homeowners to have significant equity and excellent credit in order to be qualified for getting a mortgage refinance loan.
• Minimum Credit Card Payments
Most people make the mistake of making only minimum payments on their debts and credit card balances. This doesn’t solve the problem in any way and only puts it off for the future. Debt management and relief is only possible if people pay more than what’s due monthly otherwise they will have to make high interest payments for a lifetime and get more steeped in debt in the long term.
• Credit Counseling
This includes enrolling in a debt relief program such as the National Debt Relief, which starts with a thorough and detailed financial review. A debt management plan will be provided to those individuals who have huge sums of debt, which cannot be eliminated through savings and other budgeting methods. In this plan, the credit counselor will get in touch with the creditors of the individual and negotiate with them to lower the interest rate being charged. As they are skilled, the counselors are able to negotiate very low rates of interest for their clients. Once this is done, the monthly payment will be paid to the counseling agency, which will then pay the respective creditors.
• Debt Settlement
In this process, negotiations with creditors have to be undertaken for lowering the amount owed. The debt can even be reduced by half as creditors are willing to receive something as opposed to receiving nothing if the individual goes bankrupt. However, people should keep in mind that it can have a negative impact on their credit score and they wouldn’t be able to get new loans for a while.
Nonetheless, they will still be able to manage and relieve their debt.