Choosing a Debt Relief Option Based on Your Financial Situation

If you are in debt and you want to get out of it fast, there is a specific debt relief option that you take. It all depends on your financial capabilities. If you have to choose an option to help you get out of debt, you need to consult your finances first. It will tell you just how much you can afford to put aside for your debt payments.

While all financial situations are unique, we can classify them into three different categories. The first involves those with enough income for both basic expenses and debt payments. The second involves those who have enough for basic expenses but can barely meet the minimum payments. The last are those who have barely enough for the basic expenses and nothing for their debts.

Among the three, the first category is probably the one that you want to be in. Being in debt is not a problem as long as you have the means to pay for it. In this financial situation, you can opt for the snowball or avalanche method wherein you will pay for all the minimum of your credit card debts while choosing a few priorities. Your priority debts will be paid more than the minimum requirement.

If you want to consolidate your debts, you can opt for debt consolidation loans or debt management. Both will allow you to have lower monthly payments (at least, lower than what you average at the moment) by stretching your payment term.

But if you fall under category two, you are in more trouble than the first. Having enough to feed your family and take care of basic necessities is comfort enough but if debt collectors are bothering you, it is quite hard to ignore the stress of debt. However, there is a debt relief option that you can avail if you still want to pay your debts. This option is known as debt settlement.

This option involves a risk because you will be defaulting on your payments to prove to the creditor that you are in a financial crisis. As you wait for your creditor to take notice that you have stopped paying them, you will put aside money as your settlement fund. You or a debt negotiator that you will hire will talk to your creditor to get them to settle with you. The idea is to agree to a settlement amount that you will pay for and once you have completed that, the creditor will forgive the rest of your debt.

In the last scenario, having barely enough for basic necessities, let alone debt payments, will point you towards bankruptcy. This is the least liked by both debtor and creditor because of credit implications and debt discharge, respectively. But if you have no asset to liquidate, this is the best option for you.