What Are Your Options For Dealing With Debt?

Debt can be all consuming. It can be a difficult subject matter to tackle, but the way to sort out your financial affairs is to ensure that you have a solid plan in place. Of course, there are wealth of options that will be presented to you during this time. You will need to ensure that you have a plan in place that meets the needs of your lifestyle. These options are varied, but there are some that are more applicable to your own personal circumstances than others. Once you ascertain what is best for you, you can then make the positive step of becoming debt free.

The reasons why people get into debt are vast. Sudden unemployment, relationship breakdowns and illness can all play a huge part in people becoming indebted. But, while these things are most certainly unavoidable, you can ensure that you are not susceptible to an adverse debt cycle.

 Now, it is time to recognise your financial issues early on. This is so that you can make sure that the problems are addressed and you can make the right steps into becoming debt free. While addressing issues surrounding debt can be scary to say the least, it is imperative that you don’t bury your head in the sand.

 Here are your options for dealing with debt.

Informal Arrangements

 When it comes to having an agreement set in place, these may not be as ‘rock solid’ as you may believe. On the contrary, these plans can be a little more fluid than you may have anticipated. Arranging an informal agreement with your creditors can prove to be a beneficial advantage when dealing with debt.

 You can renegotiate your payments in a more realistic way. Interest may be frozen, your monthly payments may be reduced or your term time may be extended. All of these are somewhat temporary measures, so if you know that your financial situation is going to be improved in the foreseeable future, then this may be the most positive way to deal with your debts. After all, you don’t want to take a permanent measure for a temporary problem. Think about your current situation. If there is no end in sight to your current financial woes, dealing with your creditors via an informal arrangement may not be the best way to deal with your debt problems.

Formal Arrangements 

Now it’s time to get to the nitty gritty. If you are struggling with your finances and there is little end in sight to your current situation, something more formal may be advisable.

You can seek out a wide range of different methods of dealing with your debts.

Consolidation Loans

Many people ask how to consolidate credit card debt, the answer is simply. Simply take out a consolidation loan and ensure that your debts are easier to manage. Whatever the loan amount, a consolidation loan is the best route to take if you don’t want to affect your credit rating. In fact, this can be a positive way of making sure that you are not blacklisted and you are paying your debts. This can be cheaper than an informal arrangement as you are making positive steps to deal with one creditor. You can ensure that you are only paying one rate of interest too. The term time may be extended and you don’t have to worry about debt collectors communicating with you. This is a positive step to take as it means that you are taking financial responsibility for your actions.  What is more, your credit rating and score will remain intact.

You do need to have a good credit rating in the first instance to secure this kind of consolidation loan. Much like any other loan, your consolidation loan provider will need to make sure that you are a viable prospect. So, if you foresee your situation changing, this is the savviest route to take.

Debt Agreement

If your situation is worse and you don’t have a good credit rating to fall back on, it’s time to look at your other options. With this, a debt agreement may be advisable for your financial situation. A debt agreement can ensure that you have a legally binding document and agreement in place between you and your creditors. In the agreement, you will ensure that you have a term time in place to pay the sum of debt that is owed. This can be done in instalments or in one sum.  But, this means that you freeze the interest on your current loans so that you can be debt free without incurring interest. However, the amount that you pay to your creditors will be based on what you earn after tax. So, you may be required to pay back more than you could reasonably afford. Do make sure that you seek out this option and compare it with other debt solutions.

Voluntary Bankruptcy

If you cannot agree with your creditors on the sum that is owed, or you are in dire financial hardship and you cannot reasonably pay back what you have borrowed, it may be time to look at your options. Bankruptcy should be treated as the last resort. After all, you may be forced to sell your home to pay your debts back.

While your debts will be, in effect, wiped clean, this doesn’t mean that this is a win-win solution. On the contrary, you may not be able to obtain credit in the future and you could find that your quality of life is seriously impacted. Even renting property can be problematic for those that have declared bankruptcy. Of course, if there is no way out of your financial predicament, this may be the only solution that you have.

The Final Word…

Whole dealing with debt can be time consuming, knowing your options is the best way to deal with your problems. Whether your debt is large or small, any debt can have an impact on your life. The best way to deal with debt is to face up to it. Now you know your options you can make the right move to make your financial life better all round.