Debt Consolidation Loans And Other Measures For Debt Relief

Carrying too many debts can be quite scary for borrowers if they are unable to manage their debts well. Handling multiple lenders can often weigh down heavily as the loans start staring at you, and you find it extremely hard to work out the best ways of managing several loans comfortably.

Anxiety turns into stress, and you desperately seek some debt relief that could ease the stress and enable you to carry out your daily tasks more comfortably. How to reduce the burden of loans becomes your top agenda, and you start thinking about how nice it would be if you could pay back the loans. Well, this is just fancy thought which many would consider puerile too because had you the ability to pay back loans you would not have taken it at all.

Learning the tricks of managing loans smartly should help you handle such situations more efficiently, and you would be comfortable to live with debts. Since debts have become a way of life today, you must learn about its smart handling. But still, there would be times when things might go out of control, and debt relief is what you seek desperately.

What are your options in debt relief is the focus of this article.

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Debt settlement

As the name implies, this method of debt relief consists of settling or paying back your debts once and for all so that you only carry debts that you are comfortable with.  It may also happen that you pay back all debts and become debt-free.

The process begins by negotiating with creditors or lenders after convincing them about your financial hardships that compelled you to take the decision. You must make them accept either one-time settlement of a sum lower than what you actually owe them or even lower monthly repayment whichever suits you.  Creditors might not agree to lower repayment, and it involves some hard negotiations to have your way.

However, this technique does not work for credit card companies that work on the model of revolving credit. Yet, many other lenders would agree to your proposal based on the outstanding amount that you owe to them, and it depends on your negotiating skills and how much you are able to convince them.

 Debt consolidation

Debtors must learn the art of managing creditors so that they can efficiently handle multiple debts comfortably despite maintaining several loan accounts and dealing with many lenders at the same time. However, the ground reality is that many borrowers are unable to do it, and the task of managing multiple lenders becomes a headache for them.

The debt per se is not the problem, but they are unable to manage several lenders. For them, debt consolidation can provide relief from stress because the method consists of taking one large loan to replace other small loans. In the process, several loans get replaced by a single loan and relieve you of the stress of dealing with several lenders. According to Credit Ninja Earmarked debt consolidation loans are available for the purpose, and you can even avail personal loans to pay back the outstanding amount of many other loans. 

Debt management plan

Borrowers might often experience hardships when paying back too many loans at a time because of the absence of a proper debt management plan. Despite having the financial ability to pay back loans, managing debts can become a problem.

or them, approaching a not-for-profit organization that has expertise in managing personal finance for solutions to the problem can work well as the organization can prepare a debt management plan that irons out the pressure points in the repayment structure.

The financial counselor would negotiate with the creditors with the assurance of making timely payments provided they agree to lower the payments and accept lower fees that suit your budget. The debt management organization takes up your brief and handles the debt accounts on your behalf, including making monthly payments that you deposit in their account according to the debt management plan.

However, you must be sincere enough to honor the deal by making timely payments every month, failing which it could jeopardize the deal and even result in higher interest which increases your burden instead of lowering it. 

Filing for Bankruptcy

Bankruptcy should be the last recourse for borrowers because it can destroy a person financially despite settling all outstanding debts. The decision to file for bankruptcy can leave deep marks on your life and severely damage your financial prospects in the future. Therefore, you must consult a reliable financial expert to analyze the situation and your financial status before finally taking a call.

The biggest shock is that when you file for bankruptcy, your credit rating becomes zero. You must start from scratch once again to build your financial credibility brick by brick, which can be a very tough task, if not impossible. Having the right type of assets that you can offer for settling debts is a necessity because you can neither use retirement accounts nor money accrued in your 401(k) plans to settle debts. Moreover, certain debts like child support, student loans, taxes, and restitution arising from criminal cases and alimony are beyond the scope of settlement through bankruptcy.

 Debt consolidation is more attractive

Among all the debt relief measures discussed above, debt consolidation has the least impact on the credit score and comes with some added benefits, which makes it most attractive. By availing debt consolidation loan, you get the opportunity of organizing your finances better and improve your credit score even though there is a temporary lowering of credit score when you take the new loan.

Like the topping on the cake, you can negotiate the new loan for a lower interest that gives some extra money in your pocket. Not only you wipe out several loans and substitute it with a single big loan, but you also earn something extra by lowering the interest rate.

Working with an experienced debt consolidation company should help you to obtain a debt consolidation loan easily because the company can arrange for it from the network of lenders they work with.