Your debts are piling up and you fear that bankruptcy is your only way out. Don’t make any rash moves, though, because debt relief may be a better option, depending on your situation and the kind of relief you seek. But what’s the best form of debt relief? Let’s look.

What is Debt Relief?

Basically, debt relief is a way to make your financial obligations easier to handle, whether the goal is to reduce the amount of debt fully or partially. Among other things, it can involve lowering your principal, reducing your interest rate, consolidating your debts, or extending loan terms.

The form of debt relief you need will depend on the kinds of debts you have – credit card? — and what you need assistance with the most.

Debt Relief Through Debt Consolidation

With this approach, you’ll roll multiple unsecured debts – those not linked to collateral such as a house or vehicle – into just one monthly payment. The idea is to get a lower interest rate than what you’re paying in the aggregate so that you can save money. A chief benefit is that consolidation makes bill paying easier since you only have that one monthly bill. That could also potentially benefit your credit since you’ll be less likely to forget a payment and damage your scores.

There are two main ways to consolidate debts – with a consolidation loan and with a balance-transfer card. Both require good credit, at least. Personal loans are available from banks, credit unions and online lenders. If you’re a member of a credit union, that may be the way to go since they usually are more lenient than large banks. Online lenders are popular because, with just a soft credit check, you can learn what kind of interest rate you can qualify for and use that to shop around.

You can shift your higher-interest debt onto a balance transfer credit card, which carries an interest rate as low as 0% for a promotional period of a year or more. You’ll just need to pay off the new card before the old rate kicks back in.

Debt Relief Through Debt Settlement

Here, you’ll hire a company to check with the companies you owe to see if they’d be amenable to allowing you to pay just a portion of what you owe, in a lump sum payment in full, to have your debt marked as “settled” on your credit reports. You stand a great chance since those creditors know that if you file bankruptcy, they’ll likely get nothing. How it works is, after an initial consultation in which your situation is assessed, you’ll be asked to put cash monthly into a savings-like account that will be used as leverage during negotiations with your creditors. After each debt is settled, and approved by you, the settlement will come from your account.

You will need to be aware of the choosing a scam company, since this industry has them more than most. One of the best debt relief companies is Freedom Debt Relief; it is established, reputable and is accredited. And you do need all three.

Debt Relief Through Credit Counseling

There are situations when all that’s called for is creation of a budget and some free professional advice about money management. In general, credit counselors use budgeting, education, and a host of tools to help you lower and ultimately clear your debt. This may even include financial literacy workshops.

If you’re having problems making debt payments, a counselor may advise you to enroll your debts in a debt management plan in which you make a single — lowered — monthly payment to the counseling agency. That payment will be disbursed to your creditors, who will have reduced your rate or waived certain fees.

What’s the best form of debt relief? Whichever one best fits your circumstances. If you choose carefully, you can finally regain your financial footing.

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