Solutions to Consolidate Your Debt

Getting a loan is quite easy, but becoming debt-free again seems to be a harder job. There are several methods people can use to solve the problem, and getting debt help is the first step. Debt can be of different severity, so are the solutions.

For serious situations, where nothing else seems to work, people can choose to sign an IVA, which is a legally binding agreement that usually reduces the amount of the debt by at least 40%, and does not allow creditors to sell the debt to collection agencies. Basically, it is similar to a debt consolidation loan, because you will be appointed an insolvency practitioner who will deal with all your debt issues. You will have to send him the check every month, and he will then send the money to your creditors in the previously agreed percentage (a reduced amount compared to your previous payments).

A debt consolidation loan can help you consolidate all your unsecured debts into a single loan, which offers much better terms. From now on you will only have to pay a single monthly amount, usually smaller than the total of the amounts paid before. Since this is a secured loan, the term is long and the interest rates are low, so the amount of your monthly payments will change to the better. The only issue is that you will have to put a property as collateral (most often your home), and in case some time in the future you will encounter financial difficulties again and you will be incapable of making the monthly payments regularly, you might lose your property. Still, of all the options listed here a debt consolidation loan is the most common one, because the terms of the loan are good compared to any unsecured loan type, so you will be able to afford the monthly payments.

There are many cases when the person realizes right in time that he or she might face financial issues if he or she does not manage to repay the debt in time. In this case we talk about a few months’ late payments, but the person is still not deeply buried in debt. Even if in this case it is not possible to repay the debt at once, you can seriously reduce the amount you owe by following a few simple steps.

The first step is to pay more than the monthly minimum payment (at least in case of credit card debt), this way you will be able to reduce the amount you owe and both the amount of the interest you have to pay. If you see that you cannot afford more than the monthly minimum, make a few short term sacrifices which will enable you to do so: cut back on your expenses with giving up or changing your cable subscription, eating out less often and so on.

In case you have more than one debt, you should come up with a debt management plan: calculate your exact monthly income, your living expenses and the remaining amount should be used to repay your debts. You should start with the debt with the biggest amount and highest interest rate and slowly work your way down. If the amount left for debt repayment is too small, you should cut back on your expenses using the methods described above, at least until you become debt free.

In case the situation is a little more serious, you might want to talk to your creditors and explain your situation to them. If you have a good debt management plan and you can prove your situation along with the fact that you want to repay the debt, it is highly likely that they will change the term of your loans. You might get lower interest rates, longer repayment period and so on. All it takes is to prove that you want to repay the loans, but you simply cannot afford to make your regular payments. If you consider that you could not convince your creditors to offer you better conditions, you can ask someone to help you; there are many specialized people and companies. It is also possible to contact a debt consolidation company, they can help you reduce the amount you owe by 40% simply by negotiating with your creditors. Another good part of this is that a credit counselor will deal with your debt issues until you repay the total amount.

Becoming debt-free is not a simple thing to do, but if you are capable to make sacrifices for it, you will become debt free in quite a short period of time. If you see that you cannot solve your debt issues alone, do not hesitate and ask for professional help, this way you can make you job a lot easier and you might get out of debt even quicker than you imagined.