When you're unable to make your bill payments and cannot manage your finances with ease, try finding a solution so as to avoid falling further behind. Go for a free counseling session and find the right solution to get rid of debt. If you are wondering what debt solutions are all about, check out the topics below:
Related Readings
41 Ways to compare and contrast major debt relief options
31 Ways to compare and appraise debt consolidation loan and program
31 Ways to compare and evaluate debt consolidation and settlement
Debt solutions: What they are all about
Debt solutions basically refer to the various types of methods that help you pay back your creditors. These solutions help you get financial freedom by helping you repay your outstanding bills.
There are basically 6 types of methods namely settlement, consolidation, management, self repayment plan, bankruptcy and ostrich method.
When you need the help of debt solutions
You seek the help of debt solutions under the following circ*mstances:
- You've failed to fulfill your financial obligations
- You want to be free from your financial commitments
- You don't know how to achieve financial freedom
- You're not rich enough to fulfill your creditor's demands
- Your credit score is going into a downward spiral
9 Types of consumer debts and their solutions
Here are a few strategies for solving consumer debt problems depending on the type of debt you need to pay off.
Credit/Store Card Dues
Solution:credit card consolidation or bill consolidation - Replace your multiple bills with a single monthly payment.
Suitable if: You can save a certain amount every month after meeting daily necessities.
Medical bills
Solution:Approach a debt relief company - The representative can suggest whether consolidation or settlement will work better for solving debt problems.
Suitable if:You earn a definite amount every month.
Personal loans
Solution:Opt for debt settlement - Approach a settlement company to negotiate with your creditors to reduce the payoff amount.
Suitable if:You want to get rid of your debts fast.
Payday loans
Solution: Payday loan consolidation - Approach a settlement company to get help with debt problems. You can get rid of your debts by paying less than what you owe.
Suitable if:You can pay an agreed upon monthly amount to the settlement company towards paying off your dues. You are ready to accept a lower credit score.
Student loans
Solution:Student debt consolidation loan Take out a loan and repay private student loans all at once.
Suitable if:Youre worried about private student loans. Consolidate Federal student loans (like Stafford or Perkins loans) through governments consolidation loan to take advantage of Federal loan benefits.
Multiple bills
Solution: Go for credit counseling For debt problem advice.If required, the counselor can offer a debt management plan or a DMP - You can repay debts with complete professional guidance.
Suitable if:You can take help of a certified credit counseling agency or a reliable debt management company.
Utility bills
Solution: Take help of a debt relief company. A counselor can negotiate to reduce interest rates so that you can repay dues in full. Also pay through single monthly payment.
Suitable if:You're ready to pay the professional fees.
Auto loans (Repossessed)
Solution:Settle with the lender - After repossession, negotiate with the lender to settle the unrecovered amount and the repossession expenses.
Suitable if:You can pay off a portion of the outstanding amount.
Tax debt
Solution:Take help of a tax professional - To get rid of IRS tax debt. Your tax professional can guide you regarding the best way for solving tax debt problems.
Suitable if:You will have to pay professional fees for the services offered.
Comparison of consumer debt solutions
| Questions | Debt Consolidation | Debt settlement | Debt Management | Self Repayment plan | Bankruptcy |
|---|---|---|---|---|---|
| Will creditor or collection calls get reduced? | Most likely. They will mainly communicate with your consolidation company. | Most likely. All communication will primarily be done via a settlement company. | Yes. Debt management company will communicate on your behalf. | Yes. But make sure you keep paying every month. | Yes. Creditors are barred from collection efforts after you file. |
| Will interest rates be lowered? | Yes. The company negotiates to lower interest rates. | No. | Yes. The company negotiates to reduce the rates. | No. | Not all debts can be included. So, interest payment of those included will be eliminated. |
| Can I save on principal debt amount? | No. | Yes, you can save. | No. You'll save in interest when rates are lowered. | No. You can save in interest if rates are cut down. | Debts are discharged; hence you're no longer personally liable for the debt. |
| What are the third party fees? | a) One time representation fee to send letters and receive calls from creditor/collection calls. b) Monthly representation fee. | a) One time representation fee. b) Monthly representation fee. c) A percentage of savings on debt. | a) One time representation fee. b) Monthly representation fee. | No. | Filing fees and attorney fees. |
| Effects of debt solutions | |||||
| Impact on credit score | Positive | Negative at first | Positive | Highly positive | Highly negative |
| Entry on credit report | It remains on the report till account is paid in full. | Late payments stay for 7 years; account reported as "Paid", "Settled", "Paid as agreed". Negotiate for "Paid", "Paid as agreed" status. | Report shows you're paying through credit counseling agency or Debt management company. | Account reported as "Paid". | Remains on credit report for 7-10 years. |
| Negative affect on credit score | No. | Late payments bring down your score. But once you pay off bills, your score improves gradually. | No. | No. On-time payments will have a positive impact on your credit. | Brings down your credit score by 200 points or more. |
| Availability of new credit | It will take some time before you get new credit. | Late payments will make it difficult to qualify for new credit. | It will take some time before you qualify for new credit. | Getting new credit will be easier. | Cannot get new credit for 2-4 years. |
| What we suggest | No obligation free debt counseling | No obligation free debt counseling | No obligation free debt counseling | Do it Yourself | Avoid bankruptcy |
| Will I have privacy? | Yes | Yes | Yes | Yes | No. Everybody will know youve filed bankruptcy since it's a private record. |
* Note: Text denotes positive, Text denotes negative
Be careful while getting debt solutions from a company as scams are rampant in the country. Check the accreditations and affiliations of a company before signing a written agreement. In case of bankruptcy, make sure youre working with an attorney who is well acquainted with all the laws. If youre opting for a self repayment plan, then go through the FDCPA laws minutely.
