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Debt Relief: Is It Right For You?

An unprecedented percentage of the population is in debt; many people owe so much for their homes or student loans that they feel like they’ll never escape. Fortunately, there are several forms of debt relief that individuals can qualify for.

The question is: do you need help, or do you just need a change? Answering this can tell you a lot about what form of debt relief you should seek.

Different Forms of Debt Relief

Ultimately, there are two kinds of debt relief: the kind you pay for, and the kind you do yourself.

Even though it might seem daunting, with the proper math, you may be able to figure out a budget that you can live on while still meeting mandatory minimum payments every month.

D.I.Y. Method

There are plenty of self-help books about how to “pull yourself up by your bootstraps”, but we’ve found that the simplest way to start chipping away at debt is to do the following (and Personal Finance Insider agrees):

  1. First, commit to yourself that you’re done spending recklessly and that you’re willing to make the changes you need, even though they’ll be unpleasant.
  2. STOP ACQUIRING NEW DEBT! Don’t sign up for new credit cards or take on new loans to pay past debts.
  3. See if your creditors can help. If you’ve been dodging phone calls from credit agencies, it might not sound appealing to call them on the phone, but it can really help. If you let them know that you’re willing to make payments, even small ones, they’ll often work with you.
  4. Make a budget that you can stick to; cut out all frivolous expenses, find free or low-cost alternatives to old activities. The FTC offers a handy debt calculation tool on their website that factors in your monthly payments and interest rates to show you when you could be out of debt.

Finding a Professional

There are many debt relief and consolidation programs out there. Usually, their business model is to collect payments from you to pay the credit card companies. Many people choose this method, because some companies will ensure that your credit score is frequently updated to reflect that you’re getting out of debt.

Be careful, though–many agencies push bankruptcy as the only method to achieve debt relief. Although bankruptcy is an option for some people, it has long-lasting implications for your finances.

Remember, if a company’s promises seem too good to be true, it’s usually because they are.

Consult an Adviser

It’s also a good idea to speak to a financial adviser before you decide on any drastic or long-lasting courses of action. They can steer you in the right direction and help you make an informed answer to the question, “Do I need help, or do I need to make some changes?”