Whether it’s due to spending habits, unexpected major costs, or otherwise, debt can feel like a chain hanging around your neck, and one that you want to be free of as soon as you can. Putting together a good budget can help you free up some money to pay it back, but sometimes that isn’t enough. If you’re worried that you’re going to fall behind on your payments or have trouble maintaining a healthy, full life while paying debt, there are other options worth looking at.
Negotiate With Your Creditors
Your only options are not to pay everything as is or to default on your loan. Creditors typically want to get back what they can, rather than force their debtors to the point of missing payments. If you’re proactive, you can potentially negotiate with them to lower interest rates, waive fees, or restructure your payment plan.
Debt Consolidation
If you’re having trouble managing debt across multiple creditors, and they have different interest rates and fees that are making the process more confusing and expensive, then debt consolidation might help. It allows you to roll up multiple balances into a single payment. You still have to pay it off, but it can simplify things and, in the case of high-interest accounts, it can reduce how much you actually end up paying, as well.
Debt Settlement
When you’re very unlikely to be able to pay off the total debt balance, and you’re able to demonstrate that, your creditors may be willing to work out a debt settlement with you. This typically means paying less than the full balance, in exchange for a lump sum or a few structured settlements. It can have a deep impact on your credit score and some tax repercussions, but it is a way to settle your debt once and for all, instead of having to live in a full repayment plan that isn’t realistic.
Bankruptcy
Although that word might be scary to some, the truth is that bankruptcy can be an effective option when you have debt that you know you’re not going to be able to pay off. Rather than spending months in uncertainty, making repayments that barely scratch the surface, you can plan a bankruptcy that sees most debts cleared. It does mean that you typically have to turn over what assets you have, and it has a long-lasting impact on your credit score, but it can be easier to rebuild from a fresh start than trying to find your feet while constantly struggling against debt.
Earning More Money Helps
If you’re not willing to take any of the options above, then all that remains to you is to try to make the extra money that you need. Whether you take on a side gig, extra hours at your workplace, or look for ways to sell assets you own to cover your cash needs, increasing your income can help you make debt more manageable.
Sometimes, you need to be decisive and make a hard choice to free yourself from debt. However, finding the right strategy ahead of time is much better than being avoidant and letting the stress pile up on you.
A penny for your thoughts?