For people overburdened with debt, here are five recommended strategies for debt reduction that can greatly alleviate their problems.
Five suitable strategies for debt reduction
Most of us run into debt at some stages of our lives because of unavoidable reasons, such as health problems, loss of jobs etc. Problems, however, begin when we succumb to the lure of the apparently irresistible loan offers dangled before us by potential creditors. We use our credit cards recklessly and soon find that we are in no position to repay our bills each month. That’s when we need adequate strategies for reduction of our debt burden. Here are five of them.
Taking loans from relatives or friends
If you are confident that it won’t affect your relationship with them, you can borrow money from your relatives or friends for reduction of your debt. Using this strategy, you can spare yourself the pain of paying the exorbitant interest charged by your credit card companies. But, again, think carefully because financial dealings always have the potential of ruining a relationship, however close it might be.
Option of credit counseling
Credit counseling will often succeed in reducing your interest rates as well as monthly payments. This strategy can also combine all your credit card dues to convert them into a single payment. Be careful about some unscrupulous counseling agents in the market. Inquire thoroughly before signing on the dotted line. Compare their programs before making your final choice.
Debt consolidation option
A debt consolidation loan may be a good strategy if you own any property or possess sufficient equity to borrow money from the value of your property. The interest is often tax deductible. However, you may stand to lose your property in case you fail to make your payments. Shop around to find the best bargain to reduce your debt.
Debt settlement strategy
Debt settlement or negotiation is another strategy that can be followed if bankruptcy stares you in the face. This aggressive approach of repaying an amount that is less than your total credit card bills is a better option than bankruptcy when you lag behind in making payments. Even the tax you pay on the saved amount is less than the interest you would have been required to pay. Again, compare all offers carefully before making the final choice.
Bankruptcy: the last resort
Remember, bankruptcy should always be the last option. With new bankruptcy laws having come into effect in 2005, it is necessary that you consult a lawyer before choosing this strategy. As you can no longer easily write off your debt through bankruptcy, the advice of a qualified lawyer is essential.
Choose any of the five options depending on your requirements.