Many people are finding themselves dealing with unmanageable debt and are feeling hopeless that they will ever be able to resolve the situation. Debt that has a high interest rate, like credit card debt and certain types of short-term loans, can grow quickly due to interest charges and fee and become completely unmanageable in a fairly short period of time. There are several options available for dealing with unmanageable debt and each option should be weighed carefully before making your decision.
One option that is frequently used for making unmanageable debt more manageable is using debt consolidation to bring down the cost of your debt. With debt consolidation, you basically take out one big loan to pay off all of your debts at once. You then repay the large loan, which often has a lower interest rate and lower minimum payments than you would have enjoyed making multiple payments to multiple creditors. If you consolidate your debts before defaulting on any payments, you may be able to enjoy a relatively low interest rate, but attempting debt consolidation after you have already begun missing payments will make your interest rate and payments much higher.
Debt Management Plan
A debt management plan is set up by a credit counseling company with the purpose of helping your pay off your existing debts with an affordable payment. The credit counselors work out deals with your creditors for you to repay your debts over a longer period of time or with a lower interest rate than what you currently enjoy. You pay a portion of your income each month to the credit counseling company, which then uses that money to make payments to your creditors. Your debts will stop accruing interest charges and late charges once they are under a debt management plan, but a condition of the plan may be that you cannot apply for additional credit for a certain time period after entering the plan.
Credit Repair Companies
On television, there are numerous commercials for credit repair companies that offer to repair bad credit and clean up a person’s credit history for a fee. They often claim that using their services will repair your credit enough that you will be able to get approved for a car, a credit card, a home mortgage, or a personal loan within a short time of them taking action. These companies are typically scams as there is no legal way to remove correct credit information from someone’s credit history.
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