The Reality of Large Debt
For most Americans, debt is an unavoidable part of life. This is not a bad thing. The availability of cheap credit has made it possible for people to buy their own homes without having to spend decades saving up the money.
However, for some people, debt has become a serious problem. The average household carries a credit card balance of $8,000, but many owe a lot more. If your debt is up to six figures, the most common solutions, like getting a second job, will not be enough. You need to consider something more radical.
What is debt consolidation?
Debt consolidation is a good option for people who have a lot of high-interest debt, such as credit cards. With debt consolidation, you take out a single low-interest loan and use that money to pay off all of the smaller loans. This makes debt much easier to manage. You only need to keep track of one payment each month. The low APR will save you thousands in interest fees, so you can clear your debt sooner.
There are two kinds of debt consolidation loans – secured and unsecured. To get a secured loan, you will need to put up some type of collateral, such as your house. Secured loans usually have a lower APR because the lender is taking a smaller risk. To get an unsecured loan, you don’t need to own any property. You just need to have an income.
There are many lenders offering debt consolidation loans. To find the one that’s right for you, simply fill in the form above, and let us do all the work for you.
What other options do you have?
Debt consolidation is not your only option in dealing with large debt. You may also want to consider debt settlement. With debt settlement, you negotiate with your creditors to lower the amount you owe. You can either do this yourself, or hire a company to do it for you. The biggest downside to using debt settlement is that it destroys your credit score. However, if you are $100,000 in debt, chances are that your credit score is pretty low, anyway. Also, the damage to your credit score will not be permanent. The longest it can stay on your credit report is seven years. After that, no one has to know that you’ve had serious financial problems in the past.
Video: Pros & Cons of Debt Settlement and Bankruptcy
Worst case scenario
If you really cannot afford to pay off any of your debt, your only option may be to file for bankruptcy. There are two kinds of personal bankruptcy – chapter 7 and chapter 13. With chapter 7, the bankruptcy estate takes most of your possessions, sells them and pays your creditors. Once the money has run out, the rest of your debts are erased.
If you have a lot of assets, your only option is chapter 13 bankruptcy. With chapter 13, you negotiate with your creditors for a payment plan that you can afford. You will not lose any of your assets, nor will your debts be erased. Bankruptcy may seem like an easy option, but it’s more damaging to your credit score than debt settlement. It can stay on your credit report for up to 10 years.
Video: Declaring Bankruptcy is an Option to Get Out of Debt
How to prevent large debt in the future
The easiest way out of debt is not to let it accumulate in the first place. Create a budget and live within it. Shop around before taking out a credit card or a loan, as terms and conditions vary hugely. If you do borrow money, make sure that you’ll be able to keep up with the payments even if the interest rate goes up, or if your income goes down. With debt, as with other things, prevention is the best cure.