Structured debt relief programs
If a debtor would like to reduce the total amounts of all debts held and pay them off with one lump sum, then a debt settlement program may be the best choice. In this program, a settlement company is hired to open a trust for the debtor and payments are made by the debtor into this account. The settlement company’s debt arbitrators will negotiate a reduced total payment with the creditors when a sizable sum has accumulated in the account, usually after several months and then the agreed upon amount is paid to settle the debt.
People with multiple debts may want to consolidate debt into a single monthly payment, simultaneously lowering the interest on the debt itself. A debt consolidation program accomplishes this by lowering the interest rate and waiving other fees and charges. A single payment is made each month to the consolidation company, who then disperse the money amongst the creditors.
Debt relief through debt management is a third option. This route involves a certified credit counselor who works with the debtor to design a budget unique to the debtor’s needs and circumstance to effectively get out of debt. They will also negotiate with the creditors to reduce the interest rate on any remaining balances, reducing the monthly payments.
Getting out of debt on your own
If a structured program for debt relief is not to taste, there are other steps that can be taken to get out of debt. First prepare the emergency fund; $1000 cash is a good sum to have on hand in case of the unexpected. Next, list all existing debts; have the debt with the smallest balance or payment first, then keep going up to the largest sum. Begin with the smallest balance or payment and pay down the debts one at a time, all the while maintaining the minimum payments on all other debts. Starting with the smallest first allows the debtor to see the effects of repayment more quickly and begin removing negative marks from the credit report more immediately.
source: 20smoney.com
