There are really only two options available to you should you find yourself drowning in debt and not wanting to declare personal bankruptcy. The two most frequently used options are trying to obtain a debt-consolidation loan and using a debt management company, or credit counseling service.
Debt consolidation is the fancy term used in the financial industry for borrowing money to pay off existing loans. Debt consolidation is nothing more than taking out a new loan and using the funds received to pay off your current debts.
A debt consolidation loan will do several things for you.
- A debt consolidation loan will break all your existing payments down into one smaller, and much more manageable payment. Hopefully making your payment smaller will help you avoid bankruptcy.
- Debt consolidation loans are set to be paid back over a longer period of time and at a lower interest rate than your credit cards. If the loan is secured against your property, such as a Home Equity Line of Credit (HELOC), then the interest rates and payments may be even lower than you could borrow the money anywhere else.
As we outlined earlier, you either borrow the money, or you have to seek assistance from a debt consolidation service. The decision on which option will satisfy your specific needs has a lot to do with whether or not you can qualify for a debt consolidation loan.
There is simply no way you can completely fix bad credit overnight. Without the ability to reduce your debt and pay your bills on time every month, your credit score will continue to suffer.
A credit counselor can provide you with the only other option; enrolling in a debt management plan. These debt management plans provide financial relief in the form of smaller payments and allow for debt repayment over time without all the legal fees and ramifications of a bankruptcy.