If you have to get out of debt, you want an option that will not make things a lot worse. It is such a frustrating situation to be and you will realize that getting out of it is a lot more tricky than you thought.
In truth, all forms of debt relief will require sacrifices. Whether that is on your budget, your lifestyle, and even your quality time with the family, you need to identify the things that are important to you and those that you can choose to let go. In most cases, people in debt find themselves sacrificing their credit scores just so they can achieve the ultimate financial freedom.
People who have plans in the future that will require a good credit score are very cautious about the debt relief option that they will use. While a lot of them can affect your score, you need to realize that some options are better than the rest. So if you feel strongly about this, you need to choose the program that will help you keep your score healthy.
Of course, paying off your debts will really help you get out of your credit problems without affecting your credit history. However, this is only applicable for those who have more than enough to pay for both their basic expenses and their debt obligations.
But if your disposable income (income less expenses) is not enough to cover for your many debt payments then another option is to go for debt consolidation.
There are two forms of debt consolidation and each of them will provide you with the following benefits: a lower monthly payment, possible lower interest rate, manageable single payment scheme and a minimal effect on your credit score.
The first option is debt consolidation loans. The idea here is to apply for a loan that is big enough to pay for all your other debts. What you want to do is to eliminate the little debts so that you can concentrate your efforts on just one, albeit bigger, debt. To enjoy the benefits written above, you want to apply for a loan that will have a low interest rate. That usually requires a good credit score or a collateral. Any of the two will help you get the best deal in terms of the interest amount that you have to pay for your debts.
The other option is debt management. Unlike the previous option, you enrol your debts with a third party company who will assign a debt counselor to help you work on your debts. Together, you will create a debt management plan that will span between 2-5 years in length. You will get your debt amount, pit that against your disposable income and see how much you can afford to pay every month. The goals is to allot a portion of your income that you can meet every month without compromising your basic expenses. The counselor will work on your behalf and communicate/coordinate with the creditor for a longer payment term and a lower monthly bill. You will send all your debt payments to the counselor who will distribute it for you.
While these options will not harm your credit score, you have to understand that it can only happen if you stay true to the program in terms of payments. Try not to miss any payments and you should be able to see your credit score improve – if not maintain its current score.