Debt relief options: Discover the best solution for your financial situation

I can pay most of my credit card this month, but I don’t know if I can pay off all of it.

Spending a little extra to go to a restaurant won’t hurt my finances that much.

The interest payments aren’t that bad.

Does any of this sound familiar?

The fact is, those seemingly insignificant decisions you make every day add up after a while, and before you know it, you’re in a cycle of debt you can’t seem to get out of. After all, it’s much easier to rack up the debt than to get out of it. Meanwhile, you always make minimum payments while watching the interest pile up. 

Feeling stuck and don’t know where to turn? You have options that will help you get back on track. 

Understanding your debt

Understanding your debt is the first step to taking control of your financial situation. To get started, make a list of all your debts, including:

• Credit card balances
• Student loans
• Car loans
• Personal loans
• Mortgages
• Medical debts
• Tax debts

And don’t forget to include debts that might not be top of mind, too, like those that are in collections or loans from family or friends. 

For each debt, make note of the creditor, the amount owed, the interest rate, and the monthly payment. Now you’re armed with enough information to prioritize which debts to tackle first and to develop a repayment plan.

On a side note, CNBC recently published a blog post about the best free and paid apps that help you track where your money is going. You can read the article here. These apps are a great way to make sure your spending doesn’t get out of control, plus it helps you track where your money is going – like that gym renewal from a few years ago that you haven’t used but keeps auto-renewing every year.

Debt consolidation

Debt consolidation is kind of like a magic trick that can simplify your finances and help you get out of debt. 

Imagine if you could take all your debts and combine them into one single payment. Not only is this easier to manage, it usually comes with a lower interest rate, saving you money in the long run. And you can achieve this “magic trick” with a balance transfer, credit card, personal loan, or home equity loan. 

If only it were that easy, right? 

As with any magic trick, knowing the secret behind the trick makes it a little less appealing. Consolidating your debt may lower your monthly payments but could also result in a longer repayment period. Ultimately, that could result in you paying more interest over time. 

Just make sure to read the fine print and understand any fees associated with debt consolidation before committing to it. You want to avoid ending up getting tricked into a situation that’s worse than before.

Debt settlement

Debt settlement can feel like you’re trying to navigate a jungle with no map or compass. 

This is when you negotiate with your creditors to settle your debt for less than what you owe – which can be a tricky process, to say the least. 

Debt settlement companies can help you through the process, but they may charge fees, and not all are reputable. Even worse, debt settlement can negatively impact your credit score, and there’s no guarantee your creditors will agree to settle for less than what you owe. 

It’s like trying to find your way through a dense jungle without a guide, which is why you should seek professional advice before making any decisions. The Van Horn Law Group can help you navigate the jungle of debt settlement and ensure you come out on the other side with your finances intact.

Credit counseling

This process includes creating a budget and developing a debt repayment plan. 

During a credit counseling session, a counselor will review your financial situation, then help you develop a plan to manage your debts. Once that’s in place, they’ll negotiate with your creditors to lower your interest rates or establish a payment plan. 

But, another word of caution: Not all credit counseling agencies are created equal. Some might charge high fees. Even more troubling, some might give poor advice – which can make your financial situation even more challenging. 

Remember, too, that credit counseling won’t lower your debt – it’s more about developing a plan to manage it more effectively. 

Bankruptcy

Bankruptcy can feel like you’re hitting the reset button on your finances – but it also comes with challenges. Bankruptcy is a legal process that can help you eliminate or restructure your debts. 

For individuals, there are two types of bankruptcy: Chapter 7 and Chapter 13. 

• Chapter 7: Allows for the discharge of most unsecured debts;
• Chapter 13: Involves a repayment plan typically lasting three to five years.

While bankruptcy can be a way to get a fresh start, it’s essential to understand that it comes with potential long-lasting negative impacts on your credit score and financial future. 

In other words, bankruptcy should only be considered as a last resort after all other options have been explored. Keep in mind, too, that not all debts can be discharged through bankruptcy, such as student loans and tax debts.

Take a proactive approach

Of course, the best plan would be to stay ahead of your finances as much as possible. Then again, that’s usually easier said than done – especially during the pandemic era. 

If you’re struggling with debt and need assistance, don’t hesitate to contact reputable financial advisors or a law firm like Van Horn Law Group that handles bankruptcy and other financial hardships. They can provide guidance and support to help you get back on track. 

Remember, taking action is the first step toward achieving financial freedom!