Debt solutions - 6 Ways to resolve debt faster

When you're unable to make your bill payments and cannot manage your finances with ease, try finding a solution so as to avoid falling further behind. Go for a free counseling session and find the right solution to get rid of debt. If you are wondering what debt solutions are all about, check out the topics below:

Debt solutions What they are all about

Debt solutions basically refer to the various types of methods that help you pay back your creditors. These solutions help you get financial freedom by helping you repay your outstanding bills.

There are basically 6 types of methods namely settlement, consolidation, management, self repayment plan, bankruptcy and ostrich method.

6 Debt solutions - How they can help you

We have listed below 6 solutions to get rid of credit card bills and other dues.

This is one of the solutions to credit card debt and other bills. Here creditors agree to cut down the interest rates and eliminate or reduce late payment charges. You need to make a single monthly payment to your consolidation company which then distributes the money to your creditors. Watch out for the 8 benefits of consolidation.

With this method, the company helps you to negotiate and reduce your outstanding debts. You'll have to pay a fixed amount each month to your settlement company. This amount accumulates into a lump sum and it is then paid off to your creditors.

This involves a credit counseling session wherein a credit counselor analyzes your finances and debts. The counselor prepares a budget for you so that you can put in more money towards paying your bills. If you are knee deep in debt, the counselor may suggest a DMP wherein he negotiates with your creditors in order to lower the interest rates and cut down late fees.

This is a self-help plan using which you can pay off bills on your own. No professional help is taken here. The self repayment plan will be successful if you follow a tight budget on a monthly basis.

Filing bankruptcy is no doubt one of the debt solutions. But it should be considered as your last resort because it hurts your credit and brings down your score by 200 points or more. Hence it's better to avoid bankruptcy and look for other debt solutions.

This method involves taking no steps to pay off bills. Here you ignore the debt and hope it will vanish. However, it is not advisable to ignore debts because your credit will be ruined if you don't pay. Moreover, your creditors may sue you or the collection agencies may harass you constantly.

When you need the help of debt solutions

You seek the help of debt solutions under the following circumstances:

  • You've failed to fulfill your financial obligations
  • You want to be free from your financial commitments
  • You don't know how to achieve financial freedom
  • You're not rich enough to fulfill your creditor's demands
  • Your credit score is going into a downward spiral

How much
debt consolidation
can save you

Comparison of consumer debt solutions

Questions Debt Consolidation Debt settlement Debt Management Self Repayment plan Bankruptcy
Will creditor or collection calls get reduced? Most likely. They will mainly communicate with your consolidation company. Most likely. All communication will primarily be done via a settlement company. Yes. Debt management company will communicate on your behalf. Yes. But make sure you keep paying every month. Yes. Creditors are barred from collection efforts after you file.
Will interest rates be lowered? Yes. The company negotiates to lower interest rates. No. Yes. The company negotiates to reduce the rates. No. Not all debts can be included. So, interest payment of those included will be eliminated.
Can I save on principal debt amount? No. Yes, you can save. No. You'll save in interest when rates are lowered. No. You can save in interest if rates are cut down. Debts are discharged; hence you're no longer personally liable for the debt.
What are the third party fees? a) One time representation fee to send letters and receive calls from creditor/collection calls.
b) Monthly representation fee.
a) One time representation fee.
b) Monthly representation fee.
c) A percentage of savings on debt.
a) One time representation fee.
b) Monthly representation fee.
No. Filing fees and attorney fees.
effects of debt solutions
Impact on credit score Positive Negative at first Positive Highly positive Highly negative
Entry on credit report It remains on the report till account is paid in full. Late payments stay for 7 years; account reported as "Paid", "Settled", "Paid as agreed". Negotiate for "Paid", "Paid as agreed" status. Report shows you're paying through credit counseling agency or Debt management company. Account reported as "Paid". Remains on credit report for 7-10 years.
Negative affect on credit score No. Late payments bring down your score. But once you pay off bills, your score improves gradually. No. No. On-time payments will have a positive impact on your credit. Brings down your credit score by 200 points or more.
Availability of new credit It will take some time before you get new credit. Late payments will make it difficult to qualify for new credit. It will take some time before you qualify for new credit. Getting new credit will be easier. Cannot get new credit for 2-4 years.
What we suggest No obligation free debt counseling No obligation free debt counseling No obligation free debt counseling Do it Yourself Avoid bankruptcy
Will I have privacy? Yes Yes Yes Yes No. Everybody will know youve filed bankruptcy since it's a private record.

* Note: Text denotes positive, Text denotes negative

Be careful while getting debt solutions from a company as scams are rampant in the country. Check the accreditations and affiliations of a company before signing a written agreement. In case of bankruptcy, make sure youre working with an attorney who is well acquainted with all the laws. If youre opting for a self repayment plan, then go through the FDCPA laws minutely.

Last Updated on: Thu, 17 Sep 2020