If you are struggling financially because of a severe debt burden, your first question is probably if there is any way possible that you can pay back everything you owe. Paying your debts back in-full can save your credit and help you avoid more financially damaging options, such as debt settlement and bankruptcy. In addition, while you may not be able to pay back everything you owe in-full using traditional means, there may be options available that allow you to pay in a way that is more manageable for your monthly finances.
If you are struggling to keep up with your bills and meet all of your obligations, the following list provides three alternative methods for repaying your debts in-full:
1. Balance transfer. If you have caught your financial distress early before it impacts your credit scores, you may be able to consolidate debts on your own using a balance transfer. You transfer the debts from your high interest credit cards to a card with a much lower rate. If you have strong credit, you can even find credit cards that offer an introductory period of 0 per cent AIR (annual interest) on balance transfer transactions. This means you won't pay interest for a period of time, so any money you pay on the debt would go directly to reducing the principal. Since you transfer the balances on your own and pay everything back, there is no credit penalty as long as you pay on time.
2. Debt consolidation loan. An unsecured debt consolidation loan allows you to take out a personal loan at a low interest rate. The money you receive is used to pay off your credit card debts. This takes all your credit card balances to zero, which means the only obligation left is the monthly payment on the loan. Since you pay off your credit cards without assistance, there is no credit penalty as long as you pay the loan on time. Keep in mind, you will need extremely strong credit to qualify for an interest rate that's low enough to provide a benefit for your finances; otherwise, you can actually make your debt problem worse.
3. Debt management program. A debt management program is a debt relief option offered through a credit counseling agency. You enroll in the program through the agency and they negotiate with your creditors on your behalf. As with the other two options your debts are consolidated, so you pay the credit counselling agency each month and they distribute the money to your creditors. You pay everything you owe in a way that's more manageable for your budget. Since you are paying your debts back on an adjusted payment schedule, there will be a slight credit penalty for any accounts included; however it is nowhere near as harsh as the penalties incurred for partial payment debt settlement or bankruptcy. In addition, because the agency is acting on your behalf, your credit scores are not a factor for qualification. You can enrol in the program even if you have bad credit.