Have a look at the 5 ways to pay off debt that can lead you to a more comfortable financial life.
- Interest rate arbitration:
You obtain a secured or an unseceured loan at a low interest rate to
pay off your existing higher interest unsecured debts. It helps you
manage debts by reducing your interest rates and monthly payments.
Interest rate arbitration pros- Interest rate reduction
- Lower monthly payments
- Gradual increase in your credit score
- Debt management Plan:
This is where you get debt counseling and debt advice from credit
counseling organizations. They help you plan your budget, and arrange a
plan with your creditors to lower your interest rates.
Debt management plan pros- Lower interest rates
- Elimination of late fees and penalties
- One easy monthly payment
- Re-aging accounts (bringing them current if you fell behind)
- Predictable debt payoff time frame of 5 years or less
- Debt settlement:
In this debt plan, the settlement company/law firm consults with you
about your financial and personal goals. If settling some or all of
your unsecured debts for less than what you owe is an appropriate
solution, they will create a trust account in your name and negotiate
with your creditors/collectors to settle debt.
Debt settlement pros- Lower payoff amount
- Out of debt sooner than by enrolling in a debt management plan, or when filing chapter 13 bankruptcy
- Chapter 13 bankruptcy:
This is where you can arrange full or partial payment of your debts in a
period of 3 or 5 years (the vast majority of plans in chapter 13 are 5
yrs) under supervision of the court. Chapter 13 can help those who want
to keep their personal and real property, and have a regular source of
income. This is also known as a wage-earner's plan..
Chapter 13 bankruptcy pros- Payments toward debts are fixed with no interest
- Principal amount is reduced in many instances
- You cannot be sued by creditors while making payments on your chapter 13 plan
- No need to sell assets and properties for debt repayment
- You can cram down second mortgages in some instances allowing you to keep your home
- Chapter 7 bankruptcy:
This is where your non-exempt assets are sold by the court-appointed
trustee. The sale proceeds are used to pay off your debts. You can
discharge your debts within a period of 4-6 months.
Chapter 7 bankruptcy pros- Your unsecured debts are discharged
- Liens, bank account levy and garnishments are stopped
- You cannot be sued by creditors listed in your bankruptcy after the debts are discharged
- You can protect several types of retirement accounts from creditors
- You can often reaffirm secured debts like a mortgage or car loan and keep those assets
Credit Card Debt Advice
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