If you are struggling over your existing debts, you may weigh your different options on how to get your debts settled with your creditors without having to file for bankruptcy. There are four different ways by which you can get your debts under control and start working back on the road to a financial recovery.
Contact your credit card companies: When you realize that you cannot afford to pay even the minimum amount to your creditors, it is the time to start calling your creditors and ask for help. Your creditors will be willing to work with you and lower the interest rates if you explain them your current financial situation and stay upfront. If you are paying an APR of 12%, they might bring it down to something like 6%. No creditors will want their customers to miss their monthly payments. Credit card companies make the maximum money when they charge you the highest interests and late financial fees, but if they sense that you are ready to fall behind in your payments and you cannot afford to pay them the minimums, they will try to recover the principal amount at least, probably at lower interest rates.
Consider a debt consolidation loan: with a debt consolidation loan, you can put all your bills under one monthly payment, preferably at a fixed interest rate. You don’t have to worry about paying different bills at different dates. There will be one set payment date for your debt consolidation loan repayments.
Home refinancing: Refinancing your loan is another good option to reduce your existing debts as there will be enough funds saved by you each month with lower mortgage payments. This portion of money saved can be used to pay some of your existing debts. Be aware that your home will be at risk if you are not able to make the payments in time.
Debt consolidation: there are different debt consolidation companies who can offer you the help by negotiating with your credit card companies to lower the APR. Once the debt counselor has negotiated with your creditors for lower monthly payments, you will save more money that was earlier eaten up in interests only. Before you hire a debt consolidation company, see if you can negotiate with your creditors for a lower interest rate. This is something that you can do on your own without having to hire a debt consolidation company and pay a fee for their services. Make sure that your credit rating is not adversely affected if you are enrolled in the debt consolidation program.
Debt consolidation involves many financial risks if you have bad credit, which is why people often select debt settlement to solve their debt problems.