Debt Free Solutions

Consolidation is just one of many ways to get debt free. We'll review a few of the most effective debt solutions here.

Do-It-Yourself Debt Interventions

If you are reluctant to recruit the help of a professional to become debt free, there are a few strategies you can try on your own as well. The biggest advantage to self-help, of course, is that it is free, and you can learn valuable techniques that will serve your finances well for years to come. On the other hand, many consumers who struggle with debt issues have reached the limit of their knowledge and skills with regard to debt management. Once you reach this point, you may benefit the most from professional assistance. Before you do, make sure you are doing the following:

• Budgeting - you need to make your debt a priority in your budget to reach the point of being debt free.
• Communicate with your lenders - if you're having trouble paying your debts, try to keep the lines of communication open with your creditors. You might be able to arrange a more workable payment plan or make adjustments to your rates.
• Consider refinancing - refinancing may not be possible with unsecured debt, such as credit cards, but you can almost always refinance home, auto, and other loans. See if refinancing would help lessen your debt burden.

Counseling & Consolidation

Debt counseling and consolidation are two extremely different services with the same goal: to help the client become debt free. Traditionally, debt counseling agencies do not work for a profit, and they address your financial problems holistically. They can assist you with specific debt issues as well as offer more global advice on money management and financial responsibility. You can usually work with a credit counselor for no charge or for a very small fee. Conversely, debt consolidation services work on a commission basis and typically charge a monthly fee as well. They can help you access more affordable interest rates and restructure your payments to accommodate your budget. If you are considering consolidation, make sure that the savings outweigh the costs before you sign up.

Bankruptcy

If you've tried everything you can on your own, sought the guidance of a professional, and still can't create a workable repayment plan, bankruptcy may be your only option. Sometimes, consumers have so much debt that even more reasonable interest rates and a disciplined budget can't make a difference. After you declare bankruptcy, you will be debt free, possibly with the exception of a home or car loan, but you will have a negative mark on your credit for 8-10 years. During that time, it may be impossible to qualify for loans and credit, and if you do, you will likely pay extraordinary interest rates. Because of its heavy price, bankruptcy should only be considered when you've exhausted every other debt solution. For more information, be sure to read our frequently asked questions.