Best Debt Free Options

Written by admin on April 17th, 2011

There are lots of options to becoming debt free out there, but you are looking for the best. The right debt free option depends on your financial situation which can be properly evaluated by a reliable credit counselor.

One option you may consider is to pay off your debt on your own. This will require both sufficient resources as well as self-control to be successful. If you have a disciplined personality, you may be able to stick to a lowered budget in order to make substantial payments on your credit card debt. However, if you are only able to pay a little more than the minimum payments on your credit card bills, you will find that this method will take an unwieldy amount of time.

Another option that is available is some type of loan, such as a personal loan or a home equity loan. Personal loans can be used to pay off your debt, but loans of the size you need may be hard to acquire. Even if you find a lender who would be willing to give you the money, you may find that the interest on such a loan is no better than what you can get now on your credit card. A way to get a lower interest rate is to go with a home equity loan, which uses the equity of your home as collateral for the loan. This is risky, however, since you could lose the home if you default on the loan.

A third possible option to getting debt free is a debt management plan. By using a debt management plan, your monthly payments will be more productive because your fees and interest on most or all of your accounts will be reduced. The debt management plan will also provide you with the scheduled discipline to get those accounts paid off. With a debt management plan, you should expect to get your accounts paid off in three to five years.

A final option to getting debt free is bankruptcy. There are two types of bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy will eliminate many of your debts, while Chapter 13 bankruptcy will allow you to come up with a repayment plan. Both of these options are only available as a last resort, and will hurt your credit score significantly.

Whatever debt free option you choose, make sure it is the right one for you. Talking to a credit counselor can help you create a budget as well as choose which of the above options will fit your life best.

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