You must be willing to make some tough choices if you want to repay all your debts. The most important decision you must make is deciding which debt repayment option to go with. There are benefits and negatives for each option but deciding what option is best for you mainly depend on your monthly level, your income, your debt, how much debt you want to pay off, and your credit rating. If you’re struggling to come up with the answers by yourself, don’t worry. We are going to share the best options for paying off your debts here:
1. Consumer Credit Counseling
You can choose to work with a credit counseling agency which will work in your budget and create a monthly payment plan for repaying your debt. They will create a debt management plan (DMP) for you. This will include a lower interest rate and lower minimum payments for all the creditors. Credit counseling generally takes around 3 to 5 years and you won’t be allowed to use any of your credit cards when you’re on the debt management plan. The best thing about credit counseling is that it won’t affect your credit score negatively. If you are looking for a more formal and permanent arrangement, they will look to see if you qualify for an IVA.
2. Pay by Yourself
If you choose to pay off your debt on your own, you must calculate your debt by yourself and then come up with a plan that allows you to make payments on time. You must come up with a payment schedule by calling your lenders and creditors and ask them for lower interest rates. All the responsibility will fall on you for ensuring that you send payments monthly to your creditors.
3. Debt Settlement
Debt settlement is a good option as it can bring down your debt by nearly 40% to 60% if it is successful. You will need to pay a debt settlement firm a monthly fee. They will then negotiate a payment on your behalf that will be less than the amount of your debt.
The debt settlement firm will take the money you have been sending them to make payments for the settlement once an agreement has been reached for a settlement amount. There is no way to tell whether your debt collectors and creditors will agree to the settlement offer. It is possible that you don’t get a refund if there is no agreement on the settlement.
4. Debt Consolidation
Debt consolidation is all about making one monthly payment by merging all your debts. There are some debt consolidation programs that require taking a debt consolidation loan to pay off debts. If you want to get a new loan, you must have a good credit score.
5. Home Equity Loan
You can acquire a home equity loan to pay off your debts. There are two main methods for saving money through a home equity loan. The first method requires you to save when you use the proceeds of the loan to make payments for your IVA debt. Using this method will allow you to bring down your loan from 18% down to 6%-7%. The second method involves recording all the deductions on your income tax returns. The only thing you should be wary about is not falling into a trap. You can pay off your debt with a home equity loan and then get into more debt by using your credit cards. You should be well aware of your expenses when paying off your debt this way.