When you have creditors constantly hassling you, collection agencies searching for you, and a terrible credit score lurking in the background, you might feel like you have very few options to pay off your debt and become worry-free. However, even with a bad credit score and creditors pestering you for payments, there are still many ways to free yourself from debt!
One of the first options you have is to consolidate your debt. Consolidating your debt is a simple way to combine all your smaller debts into one repayment. This is a great idea for those individuals who have the money to pay off the loans, but can’t seem to manage so many different debts with so many different interest rates. Consolidating your debt gives you the opportunity to pay off all other loans, by taking out one major loan from a bank or a loan company. Often, these creditors will offer you better interest rates than what you have been paying previously on your separate debts.
Creditors will often approve almost anyone, even those debtors with bad credit scores. This is because, in the long run, the creditor will ultimately receive more in payments from you through interest that accumulates over the time it takes you to pay off your debt. Because the amount is larger (you’ve basically combined all your debts into one), the interest will also be more. However, you are given the opportunity to pay off only one creditor and over an agreed term, making this arrangement a mutually beneficial arrangement.
If you’ve come to a point where you don’t think you will be able to pay off your debt, especially because you’ve only been able to pay off high-interest accumulations and penalty fees instead of the original debt, negotiating your debt is an option you have. When you’re at this point, it appears there is no solution and that you will be paying accumulated interest and fees for the rest of your life. However, by negotiating your debt, you may open some doors that make it easier for you to handle your debt.
Basically, negotiating your debt means that you and your creditor will be coming to a mutually beneficial agreement about how to pay off the loan. This usually includes the creditor reducing the amount of the debt significantly and offering you a lump sum amount that you will have to pay in one sum to the creditor. Some creditors may be willing to offer you an agreement in which the debt is reduced and there is a set term during which you can pay it off.
When negotiating your debt, it may be helpful for you to hire a debt managing company or work with a debt relief company. These companies have professionals who are experienced in negotiating debt and use specific tactics that will push creditors to reduce the debt amount by almost 40%. Once you’ve had your debt reduced insignificantly, it will be easier to pay it off. Just be aware of any fees or additional costs these companies may charge you.
One of the last resorts you have, if you’ve exhausted all other options and nothing seems to be eliminating your debt, is declaring bankruptcy. Not all debts can be expunged through bankruptcy. Some loans such as student loans are exempt and must be paid off. Before you declare bankruptcy, make sure that you have truly tried everything, as bankruptcy can drastically reduce your credit score. A trustee is appointed to you to handle your financial affairs. Bankruptcy lasts for three years from the date you applied or were forced into bankruptcy by your creditors. Your trustee can sometimes fight to have your bankruptcy extended up to eight years.
Declaring bankruptcy has negative consequences, but if it the only option you have at the moment, it may be better than have to worry about collection agencies taking over your assets or you being sued by the creditors. Once you have declared bankruptcy, it may be difficult to find employment, you may have some restrictions on travelling, and your assets are at risk of being sold by your trustee.
Even with bad credit, there are still options available to you to help you pay off your debt. Depending on what income you have available and how large your debts are, debt consolidation and debt negotiation are two great options you can use. Declaring bankruptcy is another option one can use to eliminate debt when you have bad credit, but should only be used as a last resort as the consequences of filing for bankruptcy are negative.
