Among the options to deal with your debts are the financial ones that negotiate them with the banks or reunify them with debts, managing to reduce the monthly payments and interest rates, a highly recommended option if you are in a complicated economic situation.
Other alternatives are consolidation loans or home equity loans, all with lower interest rates than other debts.
It is important to know well all the expenses, interests and risks involved in each process and it will be necessary a planning and your cooperation to solve the debts.
When you have serious debt problems and it is not possible to pay, all aspects of your life are affected. The only way to get rid of that situation and have a quiet life again is to find solutions.
With the different options we have today, solving debt problems is easier. These are the most common solutions to get rid of your debts:
- Debt Management Plans
- Debt Negotiations
- Consolidation of debts
- Debt consolidation loans
- Financial advice
- Refinancing
- Home Equity Loans
- Credit Cards
Debt management plan
The ideal way to start solving your debts is through a repayment plan that you can do yourself.
Planning a budget and avoiding any unnecessary expenses are two very important aspects in a debt management plan. If possible, consider working overtime and using that income for your plan and if personal discipline is a problem, you can schedule automatic payments at your bank. More information “.
Debt Negotiation
Through debt negotiations, a company that represents you or you negotiate with your creditors to reduce the amount you owe.
Debt negotiation agencies work with your creditors to reduce your debt balance, sometimes up to 50-75%. Most debt settlement companies are clear about how much you will be charged, but make sure there are no hidden expenses in the negotiation process.
Consolidation of debts
Debt consolidation is a very beneficial process for solving debts. In this process, multiple debts are consolidated into a single amount, the amount of which is paid through a single monthly payment.
The interest rate on the consolidated debt is lower than the interest on individual loans, however, if a person is using a home equity loan to consolidate debts, their home will be the collateral for the loan and if that person cannot repay, the lender can take your home and sell it to get back the money borrowed.
Keep in mind that if the time to repay the consolidated debt is longer than that of an original loan, you will be paying more interest even if the interest rate is lower.
In most cases, interest rates are reduced and occasionally late payments and taxes are also eliminated. Once the total amount of debt is reviewed, it is divided into monthly installments that make it much easier to pay.
Debt consolidation loans
Debt consolidation loans help you combine all your outstanding debts into one loan. For example, you can have a loan with a balance of €2,500 (interest rate of 15%), a credit card balance of €1,000 (interest rate of 12%) and a balance on a shopping card of €500 (interest of 10%). All these amounts could be consolidated into a loan of €4,000 (8% interest).
The aim is really to reduce the monthly instalments considerably, lowering the interest rates on the new loan or increasing the repayment period.
Financial advice
Financial counseling companies help you eliminate your debts, but they don’t consolidate them. They will develop payment plans for your outstanding debts with lower interest rates and fees.
The procedure is that you make a monthly income to the consulting company and the company is responsible for paying all your creditors. You have to be very careful when choosing the consulting company.
Mortgage-backed Refinancing
This process consists of refinancing your home and paying off your outstanding debts.
Refinancing at a lower interest rate will help you eliminate the debts with higher interest rates that you are currently paying.
You can even develop a plan that has a lower expense than the current one, since the loan can be extended to pay it off over a longer period of time, but if you increase the time the interest also increases. You need to have a clear understanding of the total cost of refinancing, because if you don’t make the payments you could lose your property.
Home Equity Loans
Equity is the difference between the market value of your home and what you owe on the mortgage, that is, the part of the property that is yours.
Home equity loans allow you to borrow money against the value of your home, without any other mortgage. It’s a fixed amount of money for a particular period of time.
The interest a person pays on a home equity loan is lower than on credit cards and other consumer debts. In addition, these types of expenses are deductible, so you convert non-deductible interest into deductibles.
In most cases these loans also have attractive rates and convenient payment plans, however, interest rates are often variable and you run the risk of losing your home if you can’t afford to pay.
