Consumer debt is a big problem for many Americans today. Whether debt results from spending, loss of income, or unforeseen catastrophes, it causes a great deal of stress to individuals and families. Creditors often use high-pressure tactics to get their money. Fortunately, there are several ways to get out of debt.
One approach to getting out of debt is to pay off high-interest loans by getting a new, lower-interest loan. A debt consolidation loan will typically provide a more manageable monthly payment and a more flexible payment plan. In order to qualify for one of these loans, borrowers should have a credit score of 640 or better and have an income that is twice the amount of their debt. In addition, most lenders require security for a debt consolidation loan. Borrowers may have to offer their home equity, retirement plan, or insurance policy as collateral.
Another way to get out of debt is debt settlement. This process involves negotiating with creditors to settle a loan for a lump-sum payment that may be less than the full amount that is owed. In many cases, a creditor will consider it worthwhile to accept a percentage of the debt. While consumers can attempt debt settlement on their own, it is more often carried out by a professional credit counselor on the debtor’s behalf. The one thing to bear in mind about debt settlement is that there is no guarantee a lender will accept the proposed terms. Visit this webpage to learn more about different types of debt settlement options.
The most extreme solution to debt is declaring bankruptcy, and it may be the only option for individuals who have a low income, no major assets, and a low credit score. This official court proceeding clears debts, but in the case of Chapter 7 bankruptcy, may require the person to liquidate many of their assets to pay off creditors. Chapter 13 is another form of bankruptcy that allows consumers to keep their assets and make monthly payments to creditors for a three- to five-year period. Bankruptcy does long-term damage to a person’s credit score, but it is the quickest way out of debt for many people.