Financial Freedom

4 Personal Debt Solutions: Which One Will Suit You?

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The feeling of being in debt is a punishing one. Debt may be somewhat normalized in modern society, but there’s no doubt that living alongside debt can have a serious impact on your mental and emotional health. In fact, as TheSimpleDollar.com points out, the emotional impact of debt can be far more substantial than many of us imagine.

If you are experiencing debt problems, then tackling the main issue and the underlying emotional problems it can cause is imperative. Below is a brief look at the four most common methods you can use to cope with debt, as well as which circumstances each is most suitable for.

Bankruptcy

Works if…

  • You cannot increase your income to help repay debts faster
  • You have higher outgoings than you can pay
  • You cannot move your debt to lower interest rates

If the above apply, then bankruptcy genuinely might be the best route for you; at the very least, it’s worth talking to a financial advisor to discuss the possibility.

Debt Consolidation Loans

Works if…

  • You are 100% sure you will be able to budget effectively for future
  • You intend to close your credit cards so you cannot run balances up again
  • You have a high enough income to pay the loan amount every month

Debt consolidation with the likes of DebtConsolidationLoans.comcan help lower your interest rates and simplify your payment schedule, helping you to get out of debt quicker.

Credit Card Balance Transfers

  • You have lower amounts of debt that are primarily held on credit cards
  • You have a good credit score and can obtain 0% balance transfer deals on a new card
  • You intend to destroy the card you transfer a balance from, so it cannot be used in future.

If you have the credit score, 0% balance transfer offers are a great way to ensure every penny you pay towards your debt actually reduces the owed amount (rather than being lost on interest).

Friends and Family

Works if…

  • You have friends or family who are able to loan you money
  • You cannot obtain a new balance transfer card or consolidation loan
  • You do not want to pay high levels of interest

Loans from friends and family can act as a form of debt consolidation and, ideally, you will be charged little or no interest. The only possible complication is you will have to actually ask for such a loan, which some people find so awkward they avoid it at all costs.

Creditor Negotiation

Works if…

  • You have funds available to make repayments but want to pay less interest
  • You are confident enough to talk directly to your creditors and demand better deals
  • You have a record of being a good customer

If you usually make your payments on time, then it’s worth asking your creditors to lower your interest rate, offer you a better deal, or accept smaller payments for a few months so you can get back on track. They might say no, but there’s no harm in asking.

In conclusion

Examine the circumstances above and see which most closely match your own experience. Hopefully, by pursuing the debt management strategy that is most applicable to you, you’ll be able to see light at the end of the debt tunnel.

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