How to get out of debt with professional help


Have you incurred a lot of debt and facing difficulty to pay them off on your own? In such a situation, you can get professional help to solve your debt problems, that is, to get out of debt. Here are 4 ways by which you can solve your debt problems and manage your finances better. 

Debt management 

A debt management plan/program is usually offered by a credit counseling agency. However, there are also some debt management companies that offer similar programs. Whenever you start experiencing problems to pay off the balances on your unsecured bills/debts, you should go for credit counseling. In counseling sessions, the credit counselor analyzes your financial situation and offers tips to manage it in a better way. When you cannot pay back debts even after following the budgeting tips and suggestions, the counseling agency may offer you a debt management plan or a DMP. 

In a debt management program, the counselor negotiates with your creditors to reduce the interest rates on your loans so as to make your monthly payments affordable. With your creditors’ approval, the agency also decides upon a monthly payment plan. As per the plan, you need to pay an agreed upon monthly amount to the agency, which upon receiving it, distributes the amount amongst your creditors. Thus, you pay off your bills in a systematic way and get out of debt within a definite time period. 

Debt consolidation 

There are several consolidation companies which offer debt consolidation programs, enrolling in which you can pay off your unsecured bills by making a single payment every month. A consolidation program works in the similar way as that of a DMP. 

Debt settlement 

In a debt settlement program, a negotiator on behalf of the settlement company, at first assesses your financial situation. It helps him to negotiate with your creditors to reduce the payoff amount since you cannot pay off the outstanding balances in full. A successful negotiation can reduce your outstanding payoff amount to about 40-60%. It helps you get out of debt quickly. The negotiator asks you to stop paying your creditors and instead deposit an agreed upon monthly amount to a settlement account. When you accumulate enough funds and the creditors agree on a reduced payoff amount, you can clear the debt by using the accumulated funds in your settlement account. 

Amongst the professional debt relief solutions discussed above, your credit score may decrease by several points when you go for debt settlement. So, consider this option when you cannot pay off the outstanding balances in full. However, it is better to go for debt settlement than having to file a bankruptcy wherein your credit score decreases more. Moreover, a bankruptcy may stay in your credit report for 10 years thus affecting your credit report for a longer period.