Knowing Your Options
Knowing the Right Solution for Debt
At Debt Free, it is our first priority to help you determine the right solutions for your unique circumstance.
Every person's
financial situation is as unique as they are. We want to ensure that the plan we develop for
you fits into your budget, is efficient in eliminating your debt and gives
you the foundation you need to reach other goals such as financial security
and home ownership.
People often ask if the following options should
be considered as part of their debt solution or if one of these may be a
better single solution than another for their needs:
Debt
Consolidation Loans
Mortgage Refinancing
Credit Card Restructuring
Nonprofit Debt Management Program
Debt Negotiation
Bankruptcy
It is our job to assist you in evaluating your situation to determine your individual benefits to debt elimination plans. A Debt Free counselor can help you to identify the potential benefits of consolidation for your situation through a preliminary analysis of your current debt.
Debt Consolidation Loans: This is the most traditional solution familiar to many people. However, you must make sure this isn't just a quick fix that will help with the immediate stress, yet end up costing you more in the long run. Often, consolidation loans just end up increasing your total debt! Personal loans from banks can be difficult to get unless you have some kind of collateral or a consigner. Finance company loans are easier to get, but these usually have high interest rates and generally you have to back them with your wages. If you can't make the payments, the company will garnish your wages. You need to evaluate this option carefully before you increase your debt obligation or put your wages in jeopardy.
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Mortgage Refinancing: When considering a solution through mortgaging your home, it is critical to evaluate the cost of the new mortgage with the actual savings you realize with lower interest rates. Simply lowering your monthly payment is not always beneficial. The costs of mortgage refinancing can increase your debt by thousands of dollars or more! Also realize that you would be adding additional debt onto your most important asset - your home! A combination of mortgage refinancing with a debt management plan is a good solution under certain circumstances.
For more information regarding mortgage refinancing, please read the following article: The 3 worst money moves you can make
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Credit Card Restructuring: It is tempting to feel like you are mastering your debt by switching between low introductory rates offered by credit card companies. However, if you are just focused on getting the best interest rates and your level of debt is not decreasing, you are still paying too high a cost. Unless you can at least double the minimum payment that the Debt Free counselor recommends as an ideal payment, you will likely pay off your debt faster and with fewer dollars through the debt management program.
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A Nonprofit Debt Management Program: With this solution, you do not risk your home or wages and a professional debt management company assists you in paying off your debt in the most cost effective manner possible! You don't have to qualify for additional credit because your debt remains with your current creditors. You will have the convenience of one payment and an effective plan to get out of debt while saving thousands of dollars in interest. A definite stress reducer!
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Debt
Negotiation:
For more information regarding debt negotiation, please read the following article: Out of the Frying Pan … Debt Negotiating Can Land You Deeper in Debt
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Bankruptcy:
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