Debt is a problem that many individuals have faced. Some people might have encountered this problem on a smaller scale while others might have had to experience the most significant effect of unchartered debts. We know that when things are small, then it is easier to handle those. For example, if there is only one debt account, then it is relatively easier to deal with that debt provided the financial condition is stable.
However, if there are multiple types of loans taken from different sources then paying the dues might become a confusing affair. It is also complicated to track the payment of the different outstanding amounts to different lenders. All these factors might make resolving debts an impossible affair. But it can be safely said that there is scope for gaining some respite from the yoke of debts. You have to be smart about handling the situation and use whatever resources are at hand for the best outcome.
The options present for handling debts
If a person has accumulated debts but hasn't been able to augment his/her income, then the financial structure will suffer from detrimental bouts of debt pressure. To alleviate this pressure, there are some alternatives. These alternatives are discussed below in detail:
- Settlement of the outstanding amount through a single payment: When the dues from various sources get multiplied with each passing day, and there is no scope of gaining any money then the financial assets of the person can be broken down to get a loan. They can then use that amount for making multiple settlements. The necessity of procuring the sum of money before placing the negotiation agreement on the table is because if the lender agrees to the negotiation, then he/she will want to have the payment immediately. Also, the immediate payment will close the debt account instantaneously and forever. Hence, if a person believes that account closure is the only way to relieve pressure, then the necessary amount needed for the negotiation should be kept ready. But in this procedure, the lender has the final say, and he/she can ultimately refuse to accept the payment of an amount that is less than the outstanding amount. Therefore, in this case, one needs to be an excellent negotiator and should have the power to convince people effectively however if the financial report of the borrower doesn’t show a vast lack of incoming funds then the lender won’t accept the negotiation.
- Joining of the different outstanding amounts: In this process, the person who has too many accounts that have turned into debts can seek to combine the debts into one account. Usually, people choose the services of a reputable debt relief company for debt consolidation loans. Once consolidated the repayable debt amount gets calculated on a single percentage of interest instead of multiple rates for multiple debts. The time limit is also gets increased, and the overall monthly installment amount is less. Companies that provide the service of debt consolidation also offer the client a consolidation loan which they can use for paying all the dues.
The client then pays the loan for a specified duration of time. It is good to remember that unlike in the settlement procedure where the debt amount is reduced, and the account gets closed after successful negotiation the consolidation option doesn’t reduce the debt so much. A person has to pay his/her debt entirely even if he/she chooses to consolidate the debts. The straightforwardness is in the process through which the debt situation gets resolved. Therefore it is essential to keep in mind that through consolidation one needs to keep on paying the loan installments as long as the whole debt is not paid back. However, to choose the option of consolidation one should be able to ensure the inflow of money so that they can repay the debt even if it is in consolidated shape.
- The legal notification of bankruptcy: This is indeed the last stand that a debtor can make when his/her finances have gone down and are beyond any scope of repair. It is a legal step that requires a debtor to file a notice by following the legal procedure. This legal memorandum is a form of a declaration by the debtor stating that he/she is penniless and hence unable to resolve any debts which he/she owes. This step is taken when the finances do not permit a person to clear his/her debt amount. This ultimate step also curbs persecution by lenders. But as it is a legal document of declaration care should be taken that the declaration is not false in any way. The cost of making a false legal declaration might pave the way for penal action. Hence a person should take stock of his/her finances and then discuss the situation with a lawyer if necessary before filing for bankruptcy.
The methods mentioned earlier are present for resolving debts with the aid of an agency or relief company, but if a person is inclined to settle the debt single-handedly, then there are a few ways to do that effectively. These methods are discussed below:
- Solving debts in ascending order where the smallest debt is the first one and the most significant debt is the last one.
- Transferring the credit card dues to a zero-balance credit card so that the debt amount doesn’t get augmented due to the varying interest rates of different credit cards.
- Selling an asset for resolving the most significant debt first to ensure that the greatest headache regarding debt is gone. However, a person should do this only when there are enough assets.
- Closing current loan accounts within the given time frame so that those do not turn into debts and create additional pressure.
There are multiple processes for dealing with the situation of debt efficiently. But before taking any step towards debt resolution one should ensure to avoid haste in the process and to gather the correct information regarding debt solving agencies.