When a person takes a loan, he/she believes that there shall not be a major problem in repaying it. However, things happen. Nobody is guaranteed to stay in the same position forever. Thus, sometimes, a person who has been pretty fine financially just a couple of weeks ago, might not be paying his/her debts anymore.
In such a case, there are several solutions. One of them is to ask for help from friends and relatives. For some people, it is easier to deal with close ones rather than with a bank. However, some people prefer a bank. Another option is to check whether a debt relief procedure might apply to you.
You should consider applying for relief when massive debt overwhelms you. However, this is not the best solution for everyone. In this article, you will learn about the different options that you have. Be aware that debt relief is not necessarily the forgiveness of your debt. In most cases, you still have to commit yourself to put in some effort.
The most effective way to seek debt relief is through an agency that specializes in this type of service. There are several reasons why an agency shall take over this process:
- They know the procedure;
- They have the needed connections.
All in all, they might manage things that you cannot.
A counsellor will analyze your particular case to devise the best strategy. The agency can negotiate the reorganization of your debt. They will present the debt relief proposal on your behalf. However, before you approach an agency, check whether you meet these conditions:
- You have massive debt, but still manageable. To elaborate a debt relief proposal, moderate debt will make things easier;
- You have all the economic means to repay your debt under better conditions. Your debt will not go away. The negotiation with your creditor will seek better payment conditions. If the creditor accepts the deal, then you have to continue repaying your debt anyway. It will be easier though;
- You commit to becoming a more responsible spender. Debt relief will help you to get rid of your debt once and for all. It is not a break for you to continue spending irresponsibly. You should plan more efficient use of your monthly income;
- Your credit score is good or at least acceptable. This is important. How will your creditor know that you can continue repaying your debt under easier conditions? A good credit score represents better leverage over your creditor.
Also, be aware that a negotiator will try to persuade your creditor to give you better repayment conditions. While the agency might do their best, the final decision is up to your creditor. He or she may not accept your request.
Different Debt Relief Modalities
There are different forms that debt relief can take. The first one is to persuade your creditor to forgive part of your debt. This may work if you offer to pay a lump sum. For instance, if you pay 50% of your debt, your creditor may agree to reduce the amount owed. However, in most cases, this option works only if your debt is not very big. Also, for you, it is needed to find that lump sum which also can be not easy.
Another possibility is to negotiate a reduction of the original interest rate. The creditor may accept to do it, but he or she may ask that you pay a larger monthly amount. This option would allow you to pay off your debt with less money though. You could be free of debt within a shorter time also. Again, this option means that you pay more per month even though the payment time is shorter. Thus, consider a reliable financial source for the period of debt repayment.
A third possibility is to ask for an extension of the repayment terms. This would give you a break to save some money and put your finances in order. The drawback is that you will be in debt for longer than planned. However, this might be an optimal solution if you have lost a job but hope to get another one soon.
If your situation has reached a critical point, give debt relief a try. It may work for you. Don`t forget though that you will still need to repay the debt. Also, consider that paying under the conditions of debt relief is something more responsible than just repaying the initial debt.