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What is debt relief? Understanding your options

You can easily pile up debts without your knowledge if you are not keen on your spending habits. Credit card debts and other loans can easily pile up due to the ever-increasing daily demands. Therefore, it is important to keep track of your borrowing. When your debts overwhelm you, get relief from credit card debt to manage your situation.

So, what is debt relief? This process involves engaging your creditors to bargain on a repayment plan for your debts. One of the options may include consolidating your debts to get a more manageable monthly payment. It may also involve a reduction of your debts or total forgiveness of what you owe. Therefore, debt relief revolves around lessening the weight of your debts through various means.

How Debt Relief Works

If you are considering debt relief, you expect to find a way out of your overwhelming debt. Therefore, debt relief is a means to refinance your debt or decrease it for easy repayment. Well, this can happen in various ways that are not necessarily the same. Here are ways through which debt relief can happen:

  • Forgiveness on a percentage of the debt

  • Agreements reached for a lower interest rate on loans

  • Consolidation of loans. This involves converging all your debts into one. That means you will take a new loan to pay all existing loans. In the end, you will have one loan to pay each month.

These debt relief options help consumers and companies to avoid filing for bankruptcy among other unfavorable outcomes. However, not every option works for all. Therefore, you must check to confirm whether you qualify for any of them.

If debt relief does not seem to work for you or you do not qualify, consider changing your spending habits. With a focus on sustainability, you can engage on a path of dealing with the situation on your own.

Consider debt relief on the following occasions:

  • If you have lagged in paying your credit card bills and other loans.

  • You are still in need after paying your monthly dues

  • It is difficult to manage debts on your own

  • When filing for bankruptcy is in your thoughts

Debt Relief Options to Consider

After looking for all the options to address your debt burden unsuccessfully, a debt relief route is a welcome idea. However, you need to look into your situation carefully and decide what works for you. The choice of debt relief option depends on the amount you owe and the interest payable for the outstanding loans. Here are the available options:

  1. Debt Consolidation

Here, the plan is to put together all your debts and make them one. In that case, you will apply for a new loan to clear the existing loans. In the end, you will have a single loan to pay per month.

  1. Credit and Debt Counseling

If your debt is manageable, you can seek counseling on your spending habits. A credit counselor will discuss with you your debt, budget and overall finances. Ultimately, they will help you develop a good strategy to manage your finances.

  1. Debt Management Plans (DMP)

With a debt management plan (DMP), you choose the debts to include within the program. After that, you make a single monthly payment spread to the listed creditors in the plan. The good thing is that you do not need a new loan to effect this plan.

  1. Debt Settlement

In this plan, debt settlement involves saving money and paying less than the remaining balance. There is a company handling your debt in this arrangement. Therefore, they will take money equivalent to a percentage of the debt you owe.

  1. Debt forgiveness

You can go for this as the last option. However, there are no guarantees. All the same, you can give it a shot at it. Some creditors can consider cancelling your debt balance. Therefore, it is something worthy of consideration.

When you have too much debt to pay, it can overwhelm you. However, you can consider debt relief options to address your problem. Look at the options discussed here and pick what works for you. Remember that your success depends on the amount you owe and the interest rates applicable.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes

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