Dealing with debt can be a struggle but it helps to understand what options of debt relief you have in order to make the right decision. For most people, the debt comes as a surprise. They don’t track their finances and hence have no clue how much debt they’re getting into.
The first step to deal with debt is to understand your current financial situation. There are a number of tools that you can use to assess your current financial status.
Create a budgeting worksheet: This is where you keep a record of your entire household budget. You need to keep track of the income that goes into daily and monthly household expenses. This will clearly show you how much you can set aside to repay debt and how much you can save.
Debt calculators: This helps you to estimate your debt repayment period. You will better understand how long it will take you to clear your debt and work out your options.
Some debt situations require you to do more than just budgeting. We’ll go over some formal solutions on how to obtain credit relief.
- Take a debt consolidation toronto loan: This is a lump sum given to pay back multiple loans so that you can make one payment with a lower interest rate. The main benefit of the consolidation loan is that it could help you get out of debt faster by making sure what you pay goes towards the principal of the loan instead of the interest.
- Home equity loan: If you have been paying your mortgage for a number of years, you may be able to borrow money against your home’s equity and clear the debt you owe. This leaves you with a ‘second mortgage’ that you can pay for in one convenient monthly repayment.
- Debt management plan: A DMP is a proposal given to your creditors where they may agree to reduce your interest rates on the money you owe after negotiating with your credit counselor. You will then be required to pay the debts you owe but with lower or no interest rate.
- Debt settlement plan: In this case, a debt settlement company will approach your creditors and try to negotiate a reduced repayment. If they agree, you will pay your creditors less than what you owe. This can be tough to go be agreed upon by your creditors.
- Consumer proposal: This is undertaken by a court order and allows you to pay part of your debt and stops any liens on your property. You will also stop receiving harassing phone calls from creditors or any other legal action taken because of what you owe.
There are many other debt relief options that you can consider to clear what you owe and begin your journey towards financial freedom. Remember that if none of the options are viable for your financial status, you can file for bankruptcy, which will protect you from any legal actions and release you from all the debts you owe.