As the effects of widespread economic downturn increase, even the most financially stable individuals and businesses find themselves in financial jeopardy. Reliance on credit accounts provides temporary relief, but can eventually lead to overwhelming debt. Before the stress of meeting payment dues and dealing with creditors becomes unbearable, take the time to evaluate your debt relief options and work towards a debt-free future.
- To get the best understanding of your debt situation, begin by compiling a list of your credit accounts and their current standing. Determine which debts are secured and unsecured, the remaining balance and payment amount for each account, the interest rates, and other relevant information. From this list you should get an idea of which debts are most pressing and the order in which they should be paid. For instance, any overdue balances should be considered urgent (as these will affect your interest rate), and remember that unpaid secured debts can lead to loss of property.
- The type of debt you owe determines your repayment and relief options. Creditors and collectors for debts such as medical bills and credit cards are less aggressive and more open to negotiation than loan officers, while services for major localized debts, such as utilities and rent, will often be terminated if no payments are being made. In many cases, you can prevent additional expenditures by implementing your own debt management plan. Contact your creditors directly to request interest rate decreases, a reduced monthly payment, consolidation options, or specialized assistance such as deferments and tax relief.
- If most of your debts are secured or your unsecured debts are too hefty to consider full repayment, you may desire a more serious course of action. Oftentimes, you may only need professional advice from debt counseling firms to assess and reorganize your finances. If you are most concerned about paying off the full debt quickly, you can consider the option of obtaining a debt loan. This will allow you to eliminate your various liabilities and focus on repaying a single loan - but ultimately, you will still be in debt. Also, previously damaged credit may affect your ability to obtain a debt loan.
- When most of your other debt options are expended, you may consider more intense legal processes like debt settlement and bankruptcy. Bankruptcy is a legal acknowledgement of your inability to pay a debt, while debt settlement requires that you halt payments until a settlement price can be reached to resolve the debt. In either case your credit will be severely damaged, but it can be repaired much faster after a debt settlement than after a bankruptcy.
- No matter which route you take, it is better to take action than to wait for the creditor to take action against you. Creditors can initiate involuntary bankruptcy, terminate other accounts you hold, and seize expensive property if you do not find a way to resolve the issue. In the worst cases you can end up without a home and no more options for settling the debt.