Different Ways to Settle Your Debts

Source

Getting into debt can be extremely stressful and can impact massively on your finances. Your credit score may be affected and you may find that you are unable to get more credit to cover the costs of your overall debts. However, you are not the only person in debt as the statistics show. The average amount of unsecured debt in the UK has risen to £200.882 billion – the highest since 2008. A report by the Pew Charitable Trusts shows that eight in ten Americans are in debt and the average amount of debt in Canada has risen by 3.6% according to Equifax. So what can you do to solve your debt problems?

Debt Relief

AAA Credit Guide (https://www.crediful.com/debt-relief/accredited-debt-relief/) suggests combining your debts into one simple monthly payment which is easier to cover than several payments with interest. An agency works on your behalf to arrange a settlement with your creditors. Many will freeze interest on your accounts and some may even agree to you paying less than you originally owed. This will affect your credit score negatively but often allows you to get out of debt faster.

Debt Consolidation Loan

This may be a viable option if you are still able to get credit and your overall debts are low. The difference between this and debt relief or management is that you will still pay interest on the loan amount but the rate is usually lower than your overall interest rates from each creditor. You can choose from an unsecured loan or a secured loan against something you own, usually your house. You should consider whether you will be able to afford repayments if you reach a financial emergency.

Bankruptcy

This is often a last resort for those in high amounts of debt but it may be the only option. Over 100,000 people in the UK are declared bankrupt every year, showing that this option is often the only solution for those in a lot of debt. Going bankrupt means writing off all of your debts but this is normally done by selling any assets you own such as your house and car. Bankruptcy is often the option for those who cannot afford to repay any of their debts but it will stay on your credit file for six years thereafter. Think carefully about this option as others may be more suitable.

Talk over your financial situation with a professional before coming to a decision on how to approach your debt. How much can you afford to budget for every month on your current salary? This will give you an idea of what option suits your situation best.