Do you need help with credit card debt, student loans, mortgage payments, and other financial responsibilities? Debt relief programs may be able to put you on the path toward financial recovery, but you will do most of the work to reach your goals. The good news is that you can get help settling debt and take steps in the right direction on your own!
Debt and credit counseling starts with looking at your income and expenses. Your plan to get out of debt typically depends on your earnings, monthly living costs, and how much money you have left over. Check out how you can find debt assistance and help yourself take the steps to becoming debt-free.
Debt can happen suddenly if you experience an emergency or an unexpected loss of income. For example, health issues could result in high medical bills and insurance premiums, and unemployment can increase your credit card usage.
However, if you have slowly racked up debt, you may benefit from establishing or revamping your budget.
One popular financial plan method is the 50/30/20 budget:
- 50% of your after-tax income pays for needs, like housing, groceries, and utilities.
- 30% goes toward wants, such as entertainment, hobbies, and shopping.
- 20% covers debt payments.
To help settle debt faster, you can always choose to pay creditors with some of your “want” funds. Discover other plans to decrease debt on your own next.
A financial professional may be able to assist you during a debt relief consultation if you need budgeting help. Once you figure out how much money you have to put toward your debt, you can create a plan to tackle it. Debt relief programs for credit card debt often use the following two payoff methods:
- The “debt snowball” process
- With this method, you put extra cash toward your account with the lowest balance and pay the monthly minimum on all the other accounts. The idea is to pay off your smallest debt first for quick wins.
- The “debt avalanche” process
- With this method, you focus on paying the accounts with the highest interest rates. This technique helps save money in the long run by reducing the amount of total interest you pay.
The next tip could help you learn how to save big bucks without changing your payment plan.
If you are looking for more money each month to help with credit card debt, you can try cutting expenses by asking service companies to lower your bills. For example, internet bills often increase after the new customer promotional period ends.
You can try to contact the company about reverting back to the promo rate or ending your service with them. In some cases, you may need to close your account and establish a new one to get the best prices.
Your creditor may help settle debt you owe, since it wants its money back. Credit card companies may be willing to negotiate more favorable terms if any of the following apply:
- You are having trouble making payments
- You make consistent on-time payments
- Your credit has improved since you received the card
Like debt consolidation help, lower interest rates help you pay the debt off faster. If you have fair credit, the next method could significantly drop your interest rate.
If you need help with debt consolidation and have fair to good credit, you may be able to combine your debt into one easy payment. Credit card companies want your business, and they often have cards with zero interest for a limited time, such as 12 to 18 months.
Consider transferring your balances from existing high-interest accounts onto a new no-interest card. However, you may need to pay off the card in full before the promotional period ends to avoid racking up more debt.
Utilizing this method could be beneficial, since 100% of your payment applies toward the principal. If your credit does not permit you to open another account, you could always try to reach out to someone who will.
Getting loans to help with debt may sound counterintuitive, but consolidation loans often help you pay your debt off faster. A consolidation loan is just one monthly payment rather than multiple payments throughout the month, and more of your money goes toward the principal.
Consider the following example of a borrower with multiple high-interest credit cards:
- $5,000 balance at 15.9% interest with a minimum payment of $245
- $2,500 balance at 18.9% interest with a minimum payment of $126
- $12,000 balance at 11.9% interest with a minimum payment of $450
Total monthly payment with interest = $937
After getting debt consolidation help, the above bills could be consolidated to a $19,500 loan balance at 7.9% interest, resulting in a monthly payment of $881. It could also save you more than $1,100.
Another option is to take more time to pay off your debt, but significantly lower your monthly payments. Taking just six months longer could reduce the payment to $720 a month.
You can apply to your bank for personal loans to help consolidate debt, or you can look into relief programs. Find out how popular debt relief programs can do more than just get you out of debt.
Most debt relief companies help settle debt with consolidation loans, while others negotiate with your creditors for a lower amount. However, it’s important to understand that many companies have high costs for this service, which can undo any savings you might receive.
Some debt relief programs help with the following:
- Debt management plans
- Debt consolidation
- Debt settlement
- Bankruptcy
Good debt relief programs can typically get you out of the red without hurting your credit score. Not to mention, some nonprofit credit counseling agencies may even be able to help you for free. Make sure to do your research before signing up with any organization.
If you feel like you’re way over your head financially, you may need to turn to the government for assistance.
Bankruptcy stops your creditors from repossessing assets and foreclosing on your home. But – contrary to popular belief – bankruptcy does NOT completely erase your debts.
With Chapter 13 bankruptcy, you follow a repayment plan and send money to a trustee, who then pays your creditors. Chapter 7 bankruptcy requires the sale of all of your non-exempt assets and properties to pay off your debts.
If you need help settling debt, bankruptcy may not offer much assistance, depending on the types of debt you have. There are several types of debt that bankruptcy does not discharge, such as:
- Alimony and spousal support
- Child support
- Court-ordered payments
- Student loans
- Personal injury payments
Declaring bankruptcy is typically the last option for debt help. Filing for bankruptcy can have a huge negative impact on your credit score, and it can take a long time to recover.