If you monthly repayments for all your debts excluding mortgage or rent are exceed 30% of your monthly income. Then, you are at an uncomfortable zone for your personal financial condition; actions are needed to reposition your debts condition to avoid moving to a bad debt situation.
This article will outline a few alternatives for getting out of debt.
DIY (Do It Yourself)
You may contact all your creditors and initial the negotiation sessions with them and let them your current debt status. Creditors sometimes are willing to negotiate lower payments or interest rates, or waive late charges and other fees, because they realize that it's better to receive some of the money owed than none of it.
While swiping the credit card is a very effective way to pay for your expenses, it may cause you into a debt trap. Thus, cutting up your credit cards (you may keep one or two credit card for emergencies usages) definitely be your wise decision. Always paying off debts with the highest interest rates first, you may need to get a second job to increase your monthly income to bear for the repayment.
But, many people lack the self-discipline to follow this approach. To successfully get out of debt using this approach, a good self-discipline is very important to keep it up.
Debt consolidation
In a typical debt consolidation, you consolidate your existing debts and mortgage payment into one, larger mortgage payment, sometimes at a lower interest rate. You take out a loan, often using your home as collateral, the lender sends you a check and you pay off your creditors. This approach may cause you to lose your home if you miss your monthly repayment, so don't fall behind!
But, if you are a kind of person who have a habit of buying on credit and carrying large balances on your credit cards, debt consolidation won't fix your underlying spending problem.
Credit Counseling If you are not a good negotiator, a credit counseling service is able to conduct the negotiations for you and provide additional guidance as part of a debt management program. You send a single payment each month to that organization, which then pays all of your creditors on your behalf.
In addition to establishing a structured payment plan based on your debt, a credit counseling agency may also be able to negotiate benefits for you, like lowered interest rates and waived late and over-the-limit fees. They can also respond to collection calls on your behalf, saving your from harassment.
Bankruptcy
Bankruptcy should only be you very last resort solution when you really can't find other solutions. Bankruptcy has many undesirable consequences that will follow you for many years, it will remain on your credit report for 10 years; almost no lender will even consider you as a borrower for at least 2 years.
Although bankruptcy may fix your short-term problems, because it stays on your credit report for so long it should only be used in extreme situations. Many people who file bankruptcy make the mistake of doing so without fully exploring their options, and never realize they have other, more viable choices that will allow them to preserve their credit standing.
Bottom line: Know that you have options for getting out of debt, and explore them fully. The key is finding the right solution for you.
