(MotivateDaily.com) – Times are tough for many people. To make things worse, one wrong financial move or setback can be a devastating blow to your credit score. That’s a downer, but there are ways to restructure or deal with your debt constructively. Here’s a few of the best options available to you.
Debt Restructuring
One of the easiest ways to gain control of your debt is to contact your main creditors. This is beneficial if you’re still current on your payments, but recognize you need some help. Therefore, time is of the essence.
Don’t be afraid to tell creditors you’re struggling. Most are willing to consult with you and come up with a solution to minimize payments and restructure the existing balance. This may be in the form of payment extensions or restructuring the loan all together.
Debt Consolidation
Another way to get assistance if you’re struggling to make minimum payments is debt consolidation. This method takes all of your existing debt, transfers the balances, and pays those accounts off. It generates a new loan by combining accounts to create one manageable monthly payment. Having one payment simplifies the loan repayment process.
A word to the wise: be sure to choose a reputable debt consolidation program, and be aware that paying off your entire debt may take longer. You should also be on the lookout for higher interest rates and any underlying loan administration fees, too.
Refinancing
Struggling with high monthly payments? Consider refinancing your loans or credit cards. This option is beneficial if you hold a minimum credit score of 620 or higher. The goal is to take out a new loan with better interest rates than your existing accounts.
If you own a home with equity, refinancing can be beneficial there, too. Taking out a home equity line of credit and borrowing against your loan helps lower monthly payments. If you don’t own a home, you can transfer high credit card balances to another card with a lower APR and better terms.
Credit Counseling
If debt is on your mind 24/7, it’s a sign you need some help with it. Contacting a credit counseling agency is a good place to start. When you call or go in, they will ask about your credit history and a brief overview of why you’re currently struggling with payments.
Credit counseling services include things like:
- Tips on managing your debt effectively.
- Ways to avoid accumulating more debt.
- How to create and build a solid savings account.
- Making an effective, working budget.
- Organizing household finances.
From there, they will assess the situation and offer tips and solutions to help you regain financial stability.
Bankruptcy
When debts get out of control and creditors are threatening to collect via garnishments or property seizures, stress runs high. If you stopped making payments and you don’t have enough income flow to submit the minimum amount, bankruptcy may actually be a viable option. It’s a last resort to prevent your core assets from being taken away.
Chapter 11 and 13 are the best choice, here, because you’re allowed to pay back your debt with a court-ordered repayment plan. Chapter 7 is a debt forgiveness program, but you must provide proof you’re amidst tough financial times to allow the court to dismiss your obligations.
There is more than one way to deal with the burden of debt. Most importantly, please don’t beat yourself up about getting into a bad situation. Millions of Americans struggle each day with debt — you aren’t even close to alone. Reaching out and getting help shows being responsible for your finances. There’s always room to improve.
~Here’s to Your Success!
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