You lose sleep and peace of mind when you have a lot of debts. When the amount of money you borrowed is small and you got it from family or friends, you can pay them back at your own discretion. However, when the money is borrowed from banks and other financial institutions, you don’t have such advantage. You are required to repay the money within a certain period of time. If you don’t, your debt increases. There are various debt relief measures that are available to borrowers. Debt relief can take various forms such as extending the loan term or reducing the interest rates on loans due. Individuals, small businesses, municipalities and large companies can benefit from debt relief. Here are some of the most common debt relief methods that are available to individuals and businesses.
Chapter 13 or 7 Bankruptcy
Debtors who don’t have any other choice can declare Chapter 7 or Chapter 13 bankruptcy. It will wipe out most of their obligation, but it will also negatively affect their credit rating. Declaration of bankruptcy will show up in the debtor’s credit report for the next 7 years, making it almost impossible for them to get any kind of loan.
When you settle your liabilities, you’d still be paying your debts but in smaller amounts. This is ideal for those who can’t afford to repay the amount they borrowed, but you have to keep in mind that this method will significantly affect your credit rating. Since debt settlement is a quite aggressive method, it’s best done with the help of a reliable provider.
Liquidation of assets can help provide debt relief. It can be anything from your house to your car, timeshare or other properties. After liquidating your assets, they are sold and the payment would be used to repay your debts. If your assets are more than your liabilities, this is an easy way to resolve the problem.
Make Minimum Payments
You can also make minimum payments for your credit cards or loans that have low interests. The goal is to repay the liabilities with higher interests first by repaying the minimum payment required for the low interest ones. This method will help you repay the liabilities that are consuming a lot of money when it comes to interest.
Credit counseling is another debt relief method. A credit counselor can help you review your current financial situation and find a way to make your debts more budget-friendly. This professional would usually transact with a creditor to create a lower monthly payment plan and make it easier for you to repay your debts. With counseling, you would still be paying your debts but you’d be doing so at a longer period of time.
So, which is the best debt relief method? Review your present financial state to determine which method suits you. Seek professional help to get a more comprehensive analysis of your current situation. Debt relief programs would then be offered based on your capacity to repay your debts.
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