Sometimes it becomes difficult to choose the best debt relief option as per your situation. You may be aware of some debt relief options but you can't select which can be the best in your particular situation. Here are some scenarios which you may be experiencing and solutions by following which you can solve your debt problems and improve your financial situation.
You have multiple credit card bills and you have a stable job
If you are in this situation, then opting for credit card debt consolidation can be the most viable option for you. If you want to do it on your own, you can opt for balance transfer method or get help from a consolidation company if you want to repay debt with professional help. If you opt for balance transfer method, then with creditors' approval, you can transfer your high interest debts to the lowest interest card. This will help you repay debt with ease. If you prefer to get professional help, then you need to pay a mutually agreed upon single monthly payment to the company, which in turn, will take care of other things, and you'll get out of debt within a definite time period.
You have no stable income presently and you need to pay multiple bills
Without a definite income every month, it might be difficult for you to pay back your outstanding dues. In such a situation, your financial situation may not permit you to repay the debts in full, so consolidation won't be a great help for you. Instead, opting for debt settlement may be the most suitable option for you. You can get help from a settlement company or negotiate with your creditors to settle the debts on your own. If you opt for professional help, all you have to do is pay a single amount (as decided by the settlement company on the basis of your financial situation) to the company. In the meantime, the settlement company will try to convince your creditors your financial situation and negotiate to reduce the bills. When they agree on a reduced payment, the settlement company will use the funds (accumulated from your monthly payments) and settle the debts.
You have multiple debts and you prefer DIY options
If you want to pay back your debts all by yourself, then debt snowball and/or debt avalanche can be your preferred option. In both the options, at first your list your debts; in debt snowball you list from lowest balance to the highest one, whereas, in debt avalanche, you list your debts from highest interest rate to the lowest one. Then, irrespective of what method you choose, you make minimum payments on all your bills and then pay something extra towards paying off the first debt in your list. After you pay off the first debt, repeat the same procedure with the second debt in the list. Thus, you become successful in paying back all your debts one by one.
You have tried to get out of debt on your own but were not successful
When you have a definite income every month, you can get help from a consolidation and/or settlement company, if you cannot pay back your debts on your own. Though you need to pay a fee for the professional services, yet you get complete guidance to repay your debts. When you approach such a consolidation/settlement company, it analyzes your situation and advises whether consolidation or settlement can be the right option for you. It also decides upon an amount which you need to pay every month. When you make this payment, the company either makes the new payments (in case of consolidation program) or the amount gets accumulated and the company uses it to settle debt (in case of settlement program). So, you can get out of debt in a systematic way.
While choosing an option, you must be aware that consolidation may help in improving your credit score as you're paying back debts in full. On the other hand, settlement can reduce your score to some extent since you're not paying your debts in full. You also have to pay a tax on the forgiven debt amount when you opt for settlement. However, debt settlement is a suitable option when your financial situation doesn't permit you to repay debts in full and also you can get out of debt fast. So, if required, discuss with a financial adviser to select which option can be the most suitable one for you.