We live in a world where having a number of debts has become something normal. Maybe in the past, if you were carrying a number of debts, or even just a single debt, you would have been the minority. However, nowadays, if you are a debt-free man, then you are definitely not one of many. Since having debt has become more and more of an issue, the ways of dealing with debt have also numbered up. Still, there are many people who still have not found the right answer and so the question “how to get rid of debt” is echoing stronger. If you are reading this, you are probably going through a difficult financial situation, have multiple debts, wondering how you regain your financial stability. We are going to get to all that. But first, let’s get to know what a debt is.
What is debt?
A debt is usually an amount of money a person owes to another person or a financial institution. A debt can also be in the form of goods or a service. However, in most cases, when we are talking about debts, we are talking about a certain amount of money.
What are the different types of debt?
There are many different debt types. The most common include payday loans, car auto loans, standard personal loans, mortgage loans, installment loans, student loans and others.
How can you get rid of your debt?
The ways of dealing with debt are more than a few and, even though they are quite different from one another, the end goal is always the same – reaching a point of debt relief. If you have only a single debt to repay, getting a second job, or making some cuts in your expenses may be enough for you do deal with that debt. Of course, it all depends on the amount of money that you need to pay back. Some people find it really hard to repay even just a single debt, and so they fall into a debt cycle by taking out one loan after another in order to repay the previous one. Once you start carrying more than one debt, that is where often the real trouble begin. Lack of sleep, constant stress and exhaustion are just a few things that people with multiple debts go through. Even though dealing with multiple debts is far more difficult than getting rid of a single debt, that does necessarily make it impossible. In fact, there are a number of ways to get rid of multiple debts, with the most popular and probably the most effective being a debt consolidation.
What is a debt consolidation?
While there are various kinds of debt consolidation, all of them normally involve combining your multiple debts into a single monthly payment. Combining your debts into just a single monthly payment can benefit you in several different ways. For once, having a single payment instead of a number of different bills can allow you to focus on just that payment, and not go through the stress of having to deal with a number of debt repayments each month. Having a single monthly payment can definitely make your life a bit easier. It can save you time and energy, as well as help you to make your payments on time, thereby minimizing the risks of late payments. Depending on the type of consolidation you choose for your battle with multiple debts, you may also get new terms for your overall debt repayment bill as well as a lower monthly payment.
What are the debt consolidation types that you can choose from?
Nowadays, with the loan lending industry being as big as it is, there are many debt consolidation services for borrowers to choose from. However, there are two main debt consolidation types that people normally use to deal with their multiple debts.
Debt management programs
Not many would argue that debt consolidation plans are one of the best ways of getting help in dealing with multiple debts. It is one of the debt consolidation types that is among the most preferred methods by many borrowers. If you choose debt management plans as your way of dealing with multiple debts, there are a few things that you need to know:
- In order to get that kind of debt consolidation help, you can normally choose between working with different financial organizations. The ones that you should really consider are the non-profit debt consolidation organizations.
- When you choose a debt consolidation organization to work with, you should get in touch with that organization and set up a counseling session to get a better idea of the whole process and to determine the amount of money that you would be able to put towards your debt repayment bill.
- Once you have chosen a debt consolidation organization to work with and have determined the features of your debt management plan, it is time to turn it into action. When you make your debt management monthly payment, that payment will then be split among all of your creditors.
Debt consolidation loans
Debt consolidation loans are without a doubt one of the most popular, if not the most popular way for dealing with multiple debts. There are different types of debt consolidation loans, and they all work in a pretty similar fashion. Getting a debt consolidation loan means that you will shuffle all your current debts into a brand new loan which is going to be larger and will also have new terms. A good credit score will normally allow you to qualify for a debt consolidation loan with terms that are better than the combination of the terms of all the debts that you will be consolidating. That includes a lower interest rate. In case you do not have a good credit score, the chances of you qualifying for a debt consolidation loan with lower interest rate become quite slim. However, even if you have bad credit rating, a debt consolidation loan may still be the best way for you to get rid of your debts and have the financial freedom that you desire.
Different types of debt consolidation loans
So in case you have decided to use debt consolidation as your method of choice for getting rid of your multiple debts, here are some loans types that you can choose to consolidate:
If you borrow a big enough amount of money, you would be able to use personal loans as debt consolidation loans. Personal loans are a type unsecured loans with a fixed set of payments over a scheduled period of time. After you have been approved for your personal loan, you will be able to use it to consolidate your multiple debts. Qualifying for a debt consolidation personal loan will mainly depend on the state of your credit score. If you have a perfect credit score or a good one, your chances of qualifying for a personal debt consolidation loan are going to be pretty high. If your credit score is poor, you will have a hard time qualifying for a debt consolidation personal loan. Even if you managed to get approved for such loan, the interest rate on your new loan is probably going to be quite high.
Credit card balance transfer
With a credit card balance transfer, you would be able to transfer all your current credit card debts into a brand new credit card. That is, in case you can manage to transfer your credit cards into a credit card with a lower interest rate. Otherwise, using a credit card balance transfer will not make much of a positive impact and, therefore, would not make much sense in the first place.
Home equity loans
Home equity loans are loans which you take out by using your house as collateral for the loan. In order to qualify for a home equity loan, you would normally need to have a decent amount of equity in your property and also a good credit score that can allow you to qualify for a loan with good loan terms. Even though home equity loans normally have lower interest rates compared to other types of debt consolidation loans, you need to keep in mind that if you fail to repay your home equity loan, you will be risking your home. And that is a big thing that should not be overlooked.
You have to understand that by consolidating your debts, you will not automatically be free from your financial process. Debt consolidation is not some magic trick or a quick fix. It is a process, usually a slow one. In order for your debt consolidation process to be successful, you would need to stay focused all the way from start to finish. Unless you are truly committed to reaching your goal, you may never actually get any sustainable success out of it.