Naritas Finance
Daily Bulletin


  • Written by News Company

Getting down to the specifics of how we choose to pay off debts can be really intimidating. Some of the methods available to us sound like others, and we’re not certain of the difference, much less their implications if we were to adopt them. When we are faced with mounting debt with various interest rates, terms, and due dates, it’s obvious we’d want to see if there’s any way to untangle some of those details.

But how do you choose what’s best for you? And what is the difference between these relief methods? Below are some considerations provided by dealing with debt.


Debt Consolidation

When you haven’t gone so far as to miss payments and your credit score hasn’t suffered, yet you’re having a tough time keeping your budget simple, debt consolidation can be helpful.


Debt consolidation is a process of taking out a loan that totals the amount of debt you owe for all eligible lines of credit. For example, if you have a car payment, a couple credit cards, and a store card, you can take the total money owed to all of these accounts, and apply for a loan in the amount needed to pay off all of them. This loan will ideally have a lower interest rate than all of your individual lines of credit, which significantly reduces the money you spend over time. Not to mention, the stress of four accounts to keep track of has now been reduced to only one account.


It’s appealing, right? While it can be an effective method for taking the reigns of your monthly budget, it’s not always an option. Considering your debt to income ratio, your consistency in income, and your credit score are all necessary in determining if debt consolidation will be available to you, or even your best option. Review savings with this calculator. Quickly calculate savings and the time it will take to pay off debt – not to mention the reduction in interest repayments through proper debt consoidation.


Debt Relief

While both terms have the word “debt” in them, and both can represent a reduction in payments and stress, they are not the same. In fact, debt relief is more often associated with settlements, bankruptcy, and/or debt management.


Debt Settlement- While there are professionals who can negotiate settlements with your creditors to pay off debts at a fraction of what’s owed, there are a lot of corrupt agents in this field. It’s not often recommended that people to opt for debt settlement because of the damage it does to their credit. Essentially, you set money aside and choose not to pay your creditors for months while you attempt to negotiate. You are not protected from collection calls or penalty fees while you are in this process, either.


Debt Management- This type of relief involves sending payments to debt counselors in a single monthly payment with an often lower interest rate. They will disburse payments to the credit card companies on your behalf. This allows you to pay off your debt in a more manageable (and consolidated) way, but in most cases, your accounts will be closed once paid in full. While it is an option if you are not in a position to consolidate with your own loan, it can be a little damaging to your credit as a result of closing your accounts.


Bankruptcy- When you know that your ability to make payments is futile, there really isn’t any recourse in debt management. Talking with a bankruptcy attorney about the qualifications of filing as well as the consequences, would be the best way to start. Factors like income, assets, and types of debt are all going to be key in finding out if bankruptcy is right for you.


Relief comes in many forms, and each has its own set of pros and cons to consider. Understanding what options you have to get your finances in check is essential to be able to take the next step with confidence that you are doing what’s best for you.




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