Trying to find debt solutions that don\’t further ruin credit scores is difficult. People often turn to personal bankruptcy in attempt to eradicate financial obligations, but this strategy usually makes matters worse. Along with costly legal expenses and court filing fees, the majority of petitioners must establish a bankruptcy payment plan under Chapter 13.

Two other debt solutions that people often use include debt consolidation and debt settlement. Both methods carry risks and may eventually force debtors into bankruptcy. Much depends on the policies of the company offering services, as well as the commitment of debtors to pay off outstanding loans.

Debt settlement is commonly used by people that carry more than $5,000 in debts. Service providers typically assess a startup fee and monthly maintenance costs. Combined, these charges can add up to about 40 percent of the overall reduction.

For example, a person owes $15,000 and their debt settler is able to reduce the balance by half through lender negotiations. This would result in a $7,500 savings. However, if the fee is 40 percent, or $6,000, debtors would actually only save $1,500.

It is crucial to calculate the actual cost of debt settlement before entering into a contact. Creditors will sometimes lower principal amounts or interest rates when debtors provide a lump sum payment and practical payment plan. Prior to scouting out a debt settlement company, consider trying to negotiate debt directly with creditors first. The worst that can happen is they will refuse the offer.

Debt consolidation is generally used by homeowners that possess accrued home equity. These types of loans require homeowners to use their property as collateral to secure financing. The primary advantage of taking out a home equity loan is that real estate loans are charged a much lower rate of interest.

Transferring high interest credit card debt or unsecured loans into a home equity can provide substantial savings. However, this technique is not without one major risk and that is real estate becomes vulnerable to foreclosure.

Another cost of home equity loans involves the service fees and closing costs of taking out the loan. These can include loan application and loan origination fees, document preparation, title search, property inspections and appraisals, and legal fees.

One debt solution that many people fail to recognize is credit counseling. When people are overwhelmed with debt problems it can be hard to make rational decisions. Credit counselors can review debtors\’ current finances and help them understand which debt reduction strategies are most appropriate for their personal situation.

Credit counselors can help devise a get out of debt plan and household budget. In some cases, counselors can help debtors negotiate with creditors to reduce outstanding balances or write-off late fees and penalties.

Individuals who are struggling to make ends meet might qualify for low- or no-cost counseling services. It can be beneficial to seek out non-profit agencies that utilize a sliding scale based on earned income to determine counseling fees.

Budgeting is probably the most affordable, yet least utilized, method for reducing debt. A lot of people have no idea how much money they bring in or send out. They live from paycheck to paycheck and always have more month than money.

Essentially, budgeting consists of making a list of household income and fixed expenses and spending less than is earned. While some expenses, such as mortgage installments, rent, insurance premiums, and car payments can\’t be altered, there are other ways to save money throughout the month.

One of the simplest ways to find ways to slash expenses is to record every penny spent over the course of one month. It can be an eye-opening experience when people begin to track their daily spending habits.

Those fancy coffee drinks and fast food lunches quickly add up to a wad of cash that can be used to pay off credit cards and monthly bills. Developing a household budget can help people get rid of unnecessary expenses and keep close watch over where their money goes.

While regaining control over debt can be challenging, with the proper tools and resources the task will be less painful and more productive. By taking time to research available debt solutions, debtors can make informed decisions that will help them successfully reach their goals.

Author Bio: Simon Volkov is a California real estate investor that shares a wealth of information pertaining to debt solutions via his website. Topics include: debt solutions, personal bankruptcy, foreclosure, credit card debt and credit counseling. Learn ways to conquer debt at www.SimonVolkov.com.

Category: Advice
Keywords: debt solutions,budgeting,personal bankruptcy,debt consolidation,debt settlement,home equity loan