Across the United States, many households find themselves in debt. Owing more money than you earn can easily have a negative affect on all aspects of your life. You’re limited in what you can purchase, and money troubles can easily cause strain on your personal relationships.
Fortunately, living in debt doesn’t have to be your reality forever.
One of the many ways you can get out of debt is by taking advantage of different debt relief options. Many people seek debt relief at some point in their lives. This is especially true if they have overspent on their credit cards and carry monthly balances they can’t reasonably pay off.
If you are significantly in debt, there are viable solutions to your financial troubles. There are many different relief methods you can take advantage of, but debt relief might be the best choice for you.
By reading the sections below, you can familiarize yourself with your the debt relief process and learn if this could be a solution to help you regain control of your finances.
Who should consider debt relief?
Debt relief isn’t for everyone. You should only consider this option if you have high amounts of unsecured debt. “Unsecured debt” generally refers to debt you accrue through:
- Spending more on your credit cards than you can afford to pay back.
- Any personal loans you take out and don’t pay back.
- Unpaid medical bills.
If you don’t have these types of debt, debt relief probably won’t be a realistic solution for your situation.
Should I check my credit report before I seek relief?
Before you get debt relief, you first need to familiarize yourself with the amount of money you owe and your overall credit standing. While it may be daunting to take a look at your finances, it’s critical that you fully understand your financial health before you make any decisions regarding relief.
To find out exactly what you owe, you can request a free credit report from any one of the three major credit bureaus.
As opposed to your credit score, which you can easily find through your banking institution, your credit report includes more detailed information about your borrowing history. You can use your report to:
- View any accounts that are open under your name. This is a good way to keep track of the amount of credit cards you have.
- Detect identity theft. If your credit report reveals any accounts you don’t remember opening, you may be the victim of identity theft. Beyond compromising your personal information, this can also have a negative effect on your overall credit.
- See how many hard inquiries you’ve had. Whenever a bank or landlord needs to run a credit check on you, this shows up as a hard inquiry in your report. You can keep track of how many of these you’ve had in your life by reviewing your report.
If you want to check your credit report, you can easily do so online. You’re entitled to one free annual credit report. Once you have this information, you can begin to look at your debt relief options.
Top Credit Reporting Bureaus
- Free Credit Report With Experian
- Monitor Your Credit with TransUnion
- Equifax Identity Monitoring Services
Explore Your Debt Relief Options
Once you determine that debt settlement is what you need to do to pay off what you owe, you can take a look at the different settlement methods you can use.
Credit card settlement can be done in several ways. Some of the most common ways to settle your debt include lump-sum settlements and hardship plans.
While there are several debt relief options that may be available to you, there is no “one size fits all” approach to debt.
Your best option to settle your debts will depend on your financial situation, including the amount you owe, your income and how much you can allocate towards your debts. Therefore, it is essential that you learn more about each type of debt relief to ensure you choose a method that suits your needs.
If you’ve got some cash on hand but not quite enough to pay of your debt in full, the company you owe might be willing to negotiate a lump-sum settlement.
If you have credit card debt, this could be an especially good option for you. Sometimes, credit card companies will cancel your debt if you pay off a portion of what you owe in full. Depending on the company you’re negotiating with, you could be able to save big if the amount they accept is significantly less than what you owe.
Your creditor may offer an amount for you to settle, and you can give a counteroffer until you reach a compromise where you’re both happy.
Tips to Remember About Lump-Sum Settlements
- Companies are not obligated to settle with you. This means you need to make sure your counteroffer is reasonable so they don’t retract their offer.
- You should always be polite. If you’re in debt and are stressed about it, it’s important that you remain polite on the phone. Credit card companies may be less likely to negotiate with you if you’re rude or mean.
- You must pay the amount you agree to at once. If you settle with a credit card company, you’re on your way to fixing your finances. However, you need to make sure you have the funds available to pay what you agreed to. Otherwise, this could cause more trouble in the future.
- Pay on time. Once you close the deal, issue the payment as soon as possible.
If you’re going through a job loss or have recently been diagnosed with an illness and can’t pay off your debt, you may be eligible to participate in a hardship program.
Credit card companies may give you the option of settling your debt through a structured payment plan. In hardship programs, companies will also usually lower your minimum payment, interest rate or other fees. Over time, this will make it so that you pay less than what you owe.
Additionally, some companies may be willing to offer an extended payment plan as part of a hardship agreement. If you’re interested in either of these options, speak with someone at your credit card company.
Additional Debt Relief Tips
- Speak with a financial advisor to determine which option might be best for you.
- Be aware of the negative effects different debt relief options can have on your credit score.
- If these methods don’t work, you might be able to file for bankruptcy.