Owing money is never a good feeling. It can start as just a small amount that you owe and then it seems to grow and becomes a huge dark cloud that is looming over you.
But the important fact to remember is that it won’t go away until you decide to make the effort to pay it off.
Ignoring debt will never provide an answer to your problem, it only prolongs the problem and causes the debt and issues related to it to increase. There are many different types of debt that you might be facing but there are also many types of debt financing available. One of them could be the solution to your debt issues.
The Debts Plaguing Consumers
One of the most common types of debt is revolving consumer debt. This type includes credit card debt, payday loans and other high interest loans. Sometimes this debt is the result of an unfortunate situation such as an injury or loss of a job and other times it is the result of living beyond your means and getting so far in debt that you feel overwhelmed.
Another huge source of debt for many consumers is medical debt. It can be the result of not having insurance or it could be from large deductibles that insurance does not cover. Mortgage debt or housing costs are a debt that nearly everyone carries. It is just the cost of having a place to live.
Another form of debt that everyone faces is tax debt. Not everyone is in a position to be able to pay their taxes in full each year and that results in additional debt being carried to the following year. Student loan debt and auto loan debt are also common and self-explanatory. Failed businesses are another source of debt for many consumers who were unable to make their small business profitable and were forced to close their doors.
And a final type of debt that is most difficult to repay is a cash advance loan. This type of loan has become popular in recent years and brings with it high interest and a difficult repayment schedule. The common factor among all of these types of debt is that they need to be paid off so that you can reduce your stress and begin to rebuild good credit.
One of the most common types of debt is revolving consumer debt. This type includes credit card debt, payday loans and other high interest loans. Sometimes this debt is the result of an unfortunate situation such as an injury or loss of a job and other times it is the result of living beyond your means and getting so far in debt that you feel overwhelmed. Another huge source of debt for many consumers is medical debt.
It can be the result of not having insurance or it could be from large deductibles that insurance does not cover. Mortgage debt or housing costs are a debt that nearly everyone carries. It is just the cost of having a place to live. Another form of debt that everyone faces is tax debt. Not everyone is in a position to be able to pay their taxes in full each year and that results in additional debt being carried to the following year.
Student loan debt and auto loan debt are also common and self-explanatory. Failed businesses are another source of debt for many consumers who were unable to make their small business profitable and were forced to close their doors. And a final type of debt that is most difficult to repay is a cash advance loan.
This type of loan has become popular in recent years and brings with it high interest and a difficult repayment schedule. The common factor among all of these types of debt is that they need to be paid off so that you can reduce your stress and begin to rebuild good credit.
Consolidation is a Strategy
The good news is that most types of debt can be consolidated. This means that you combine many or all of your debts and pay them off with a single loan. The purpose of consolidation is that it will lower your interest rate and will reduce your monthly payment.
Bill consolidation loans can be obtained at a bank or a credit union if your credit is good enough to get the loan through those means. Another option is to use a debt management plan that is run by a non-profit organization. The process starts with credit counseling to determine how much you owe and how much you can afford to pay per month.
The agency can then help you get a low interest loan with little or no fee up front. You then make a single monthly payment to the agency running your plan. The plan can take as long as 3-5 years to pay off your debt but after you have completed the program you are debt free and can begin to rebuild a strong credit score.
The good news is that most types of debt can be consolidated. This means that you combine many or all of your debts and pay them off with a single loan. The purpose of consolidation is that it will lower your interest rate and will reduce your monthly payment. Bill consolidation loans can be obtained at a bank or a credit union if your credit is good enough to get the loan through those means.
Another option is to use a debt management plan that is run by a non-profit organization. The process starts with credit counseling to determine how much you owe and how much you can afford to pay per month. The agency can then help you get a low interest loan with little or no fee up front.
You then make a single monthly payment to the agency running your plan. The plan can take as long as 3-5 years to pay off your debt but after you have completed the program you are debt free and can begin to rebuild a strong credit score and borrow against your car.
Borrow From Yourself
If you have equity in your home or have a retirement account, then you have another option. Taking out a home equity loan allows you to borrow against the value you have built in your home to pay off high interest debt.
Another benefit to using a home equity loan to pay off other types of debt is that the interest you pay on the home equity loan can be tax deductible. So in a sense, that is a very low interest loan for you to take advantage of. Many retirement accounts allow you to borrow against the money that you are saving for retirement.
Each plan has different terms and requirements so you would need to contact your plan administrator to learn if you are eligible for a loan and the amount that you can borrow. In either case, it is very important that you diligently pay off the loan in full and on time. With the home equity loan, you are risking your home if you default and with the retirement loan you are risking your retirement nest egg and future income in retirement.
If you have equity in your home or have a retirement account, then you have another option. Taking out a home equity loan allows you to borrow against the value you have built in your home to pay off high interest debt. Another benefit to using a home equity loan to pay off other types of debt is that the interest you pay on the home equity loan can be tax deductible.
So in a sense, that is a very low interest loan for you to take advantage of. Many retirement accounts allow you to borrow against the money that you are saving for retirement. Each plan has different terms and requirements so you would need to contact your plan administrator to learn if you are eligible for a loan and the amount that you can borrow. In either case, it is very important that you diligently pay off the loan in full and on time. With the home equity loan, you are risking your home if you default and with the retirement loan you are risking your retirement nest egg and future income in retirement.Ask for Help- Even if it’s Difficult
Ask for Help- Even if it’s Difficult
The last thing anyone wants to admit to family or friends is that they have been irresponsible with their money and have gotten in over their head with debt. But this could be a viable solution if you have a low credit score and cannot secure a loan from a bank or through other means. But this should be a request that you make after you have exhausted other options. Instead of just asking for money, take some time to make a list of your debt and the interest rates that you are paying.
Also create a sample budget to determine how much you will be able to pay back each month on the loan you are asking for. Show this to the person you are asking to loan you money as a sign that you have carefully thought through both your situation and your options for repaying your debt. Offer to write down the agreement that you have with them for repayment so that there is never a question about the terms that you agreed to.
If the person is kind enough to offer to help you then you need to do everything in your power to repay them according to the terms of your agreement. This is no different than a loan from a bank. In fact, it might even be more important because you are risking the loss of a good friend or family member if you fail to repay them. You can get a title loan without job, too.
You Have Options
“You have options” are the most important words to remember when you begin to explore types of debt financing. The only mistake that you can make is ignoring your debt with the hope that it will go away. With your debts paid you will have an opportunity for a financial new beginning as you rebuild your credit.
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