Loss of income when you have too many dues in the market can make life seriously impacted. Mental peace, reputation, legal records, all gets disrupted when you start getting notices from your creditors for non-payment of dues, and recovery of dues and penalties. To bring things into the track, there are some financial decisions you may take. Three commonly taken steps by most debtors in trouble are bankruptcy, debt consolidation, and debt settlement. But which step you would take depends on many factors, which you must understand as you prepare to consult a financial advisor or lawyer. Accessing your situation, and finding out what fits for you is a prime requirement to deal with unmanageable debt.
You would consider declaring bankruptcy when your situation may be like this:
- Your debts are too high for you to pay and you have no funds at all or very meager income which hardly suffices for your basic survival.
- You see no chances in the future to earn a sufficient income ever so that you may lead a good life and pay a lowered settled amount towards your creditors.
- You do not care at the situation about your credit score or market reputation and reliability as the debtor.
- You just need to get out of the situation at any cost.
But it’s good to keep in mind that declaring bankruptcy should be the last option for you, and should not be a healthy choice in the first place. Every person has some hope to get funds or earnings from any source, and you should also try so, and rather think of settling the debt than to give up.
Considering Debt Consolidation
Considering debt consolidation is an option when your situation may be like this:
- You have multiple debts
- You are paying high rates of interest for your debts and are looking for a low rate of interest loan to replace the current loans.
- You are having trouble tracking the loans and their EMI payment dates and getting all the more confused with the debt management.
- Often you are having trouble paying all the EMIs at different times of the month due to a shortage of funds or slipping out of mind.
- You have estimated that you can squeeze out a certain amount every month to pay for a single consolidated loan in case you get one approved to pay off all the current dues.
- You are ready to handle the debts and pay them off instead of escaping and want a reasonable fix for the situation.
- You do not want your credit score to be affected any further for the nonpayment and missed dues, and you want to rather improve the credit rating in future.
- You have a residence proof which shows you staying at the same address for at least six months.
- You have a stable income which would help you apply for the new loan
- Your credit score is not highly impacted and still shows a reasonable rating to get the loan approved.
If all the points above apply to you, then you are the right candidate for debt consolidation or put it this way, that debt consolidation is a good option for you.
Considering Debt Settlement
Debt settlement is the option for you if you are in the following situation:
- You have one or more debts which are too big for you to handle
- You struggle every month to pay for them
- You have missed one or more payments for a loan, or you feel you are completely unable to pay in the days ahead.
- You have no stable income, or your earnings are not sufficient to let you pay for the EMIs after deducting basic survival expenses.
- You are in such a condition where you have become mentally or physically challenged and cannot work further to earn.
- You have ample time at hand to wait for a settlement, and till that time you are not running away anywhere.
- You know that your credit score has been affected due to your irregular payments of the installments, and yet you are not seeking an immediate improvement of the credit score through the settlement. Rather you realize and accept the fact that the credit rating will be impacted with time as the settlement goes from initiation to finalization.
- You are preparing to arrange the lump sum amount to settle the dues after settlement and anticipate gathering the amount by the time the settlement proceeds.
- You are ready to bear the expenses for paying the required fees to the debt settlement services.
When you see that many of the points above are true for you, then you may plan a debt settlement. In fact, unlike debt consolidation which is applicable only for multiple debts, a debt settlement is applicable even for one single loan if the amount is unaffordable for you. But some research work and feedback study must be done before you proceed.
Things to know before you go for debt settlement
Debt settlement is an important decision and needs to be taken care of by seeking the help of financial consultants and debt settlement advisors. You can choose a debt settlement service by going through other people’s reviews in your area. Services get their debt settlement ratings based on which you may choose one.
Things to know before you go for debt consolidation
If you are considering debt consolidation, then you must be sure that debt consolidation is possible only when you show a promising income to pay for that new consolidated loan with proper proof of residence and earnings. Also, you must have the minimum credit score to get the loan approved at a low-interest rate. You won’t need any agent or consultant ideally to go for the loan, but hiring one would be your personal choice. Besides traditional banks, there are websites and online banks through which you may apply to multiple sources for a debt consolidation loan.