Clear debts - 3 Options and 5 Tips to get you out of debt

If you're getting deeper into debt and you're having trouble paying your monthly installments, look out for options to pay off your dues and get relief from your debt load. There are different ways to clear debt and reduce your stress. This article deals with some of the options you may choose in order to pay off bills and get rid of creditor harassment.

Options to clear debt and get rid of dues

There are 3 options to help you pay off past due accounts and other bills. Check out the options given below.

Option 1: Professional debt relief services
These services are offered by consolidation, settlement or debt management companies. Such companies offer programs in order to help you clear your debt at low interest rates or settle your debt for less than your past due amount. Given below is a synopsis of how each program works.

Debt consolidation program: This is one of the most popular clear debt solutions which helps you get rid of debt in consolidated monthly repayments. This means, you can replace payments on several bills with a single consolidated monthly repayment. Whether it is credit card consolidation or a program to consolidate payday loans, you can expect to have your interest rates reduced after a negotiation between your creditors and consultants at the consolidation company. The company will also negotiate for accounts which your creditors have sold off to collection agencies.

Debt reduction: It is appropriate for those who're in financial hardship and cannot carry on with monthly repayments. Debt reduction programs are offered by settlement companies which talk to creditors or CA on your behalf and negotiate a reduction of your overall debt balance. Depending upon your financial situation and how much you owe, creditors may be willing to reduce your dues by 40-60% of what you owe.

Credit card debt management: If your credit card debts are spiraling and you're in trouble managing multiple cards, you can go for credit card debt management programs. Once you enroll in such a program, consultants at the debt management company negotiate low interest rates with your creditors or CA and help you clear your debt faster.

Apart from the above clear debt solutions, there are credit counseling services which offer you financial advice on how to erase debts. Credit counselors help you prepare a monthly budget and provide money management tips which enable you to deal with several bills at a time.

Option 2: Self repayment plan
With a self repayment plan, you take the initiative to write to your creditors and request them to lower your monthly repayments. If you have accumulated credit card bills, you can request your credit card issuers to cut down high interest rates. The creditors may even freeze your interest rates for a certain period of time. This will make it easier for you to repay your card balances. Just check out the 6 steps and 5 tips you should follow in order to clear debt with the help of a self repayment plan.

Option 3: Applying for a loan to pay off dues

You can take out a personal debt consolidation loan from a bank or financial institution and clear debt with a single lump sum payment. In order to get approved for the loan, you need to satisfy the lending criteria such as having good credit and income.

A consolidation loan comes along with lower monthly payment and a longer repayment period. The longer your period of repayment, the more you have to pay back in overall interest. Just keep in mind that when you go for a loan to repay your bills, you don't get out of debt completely. You still need to pay off this loan in small monthly installments.

5 Tips to help you clear debt

When you're paying off your dues with or without professional help, follow the tips given below so that you don't get into trouble while making your payments.

  1. Try to pay more than the minimum payment: The minimum payment is a way of extracting interest payments from debtors for a long time without lowering their outstanding balance. So, paying only the minimum on your credit cards will keep you in debt longer. Therefore, you should try to pay extra towards your balance. If you're in a consolidation program, you can inform the consultants about any change in your income and accordingly they'll talk to your creditors and raise your monthly payments. This will help you clear your debt in much less time.
  2. Know the 4 keys to getting out of debt: While you're on your way to paying down your dues, check out the 4 keys to getting out of debt.
  3. Switch over to an interest-free card: You can move the balance on all your cards to an interest-free card and freeze your interest payments. But the interest free period should be preferably long, say around 15 months or so. During this time, you can pay down the principal balance as much as possible. This will help you to clear debts faster.
  4. Avoid scams when you seek professional help: When you choose an online debt relief service, make sure you check its accreditations and online reputation. Know how to avoid online consolidation/settlement scams.
  5. Dealing with CAs: If some of your accounts are sent to collections, make sure you're aware of the FDCPA (laws which govern the practices of CAs). The CAs are known to harass consumers over the phone and carry out illegal practices in order to collect their past due payments. In order to avoid harassment by the CAs, you need to know how to deal with debt collectors when they take steps to collect your payments.

If you're falling behind on your bills, contact your creditors as soon as possible and work out a payment arrangement you can afford. If you don't find it easy to communicate with creditors, seek professional help to negotiate with them in order to reduce your balance or lower your monthly repayments. Once you settle your dues or obtain low interest rates to meet up with your monthly payments, you'll be able to clear your debt and get back on top of your finances.

Last Updated on: Fri, 6 Apr 2018