If you are drowning in credit card debt, have payday loan balances or are struggling to pay off personal loans, it may be time to start thinking of ways to reduce what you owe. The good news is that there are many ways in which you can reduce outstanding balances and increase your level of financial security. In many cases, your creditors will work with you to relieve some or all of your debt burden.
Consolidate Credit Card Balances
Transferring all of your current credit card balances to a new card with 0 percent interest can reduce your monthly payments. Furthermore, you can pay down your principal balance faster because 100 percent of each payment goes directly to your balance. Other ways to consolidate your debt include a home equity loan or a personal loan.
Ask Your Creditors About a Debt Settlement
A debt settlement allows you to close your account by paying less than what you owe. It is possible that your creditors will accept as little as 50 percent or less of an existing balance to settle your account. While you can work with a debt settlement agency to negotiate new loan terms, you can also do this on your own. Typically, all you need to do is make an offer in writing or over the phone. If an offer is accepted, make sure the acceptance is in writing in case a creditor tries to go back on the deal.
Sell Items If They Have Equity
If your car has sufficient equity, it may be a good idea to sell it. In addition to profiting from the sale, you no longer have to make payments each month. However, it may only be possible to sell a vehicle or other property if you have a free and clear title. If a Houston title loan company or any other party has a lien on the title, it may not be possible to make a sale until the lien is resolved.
Ask Someone to Live With You
Homeowners may be able to reduce their mortgage payment by taking on a roommate. This may also work for those who are looking to reduce their rent payment and have an extra room available. Having a roommate may also make it easier to pay for utilities and other expenses related to owning or renting a property. Homeowners may also look to refinance their current mortgages to reduce their interest rate or get rid of mortgage insurance.
File for Bankruptcy
While this should always be a last resort, filing for bankruptcy may make it easier to reduce what you owe. In some cases, debts may be discharged without making any payments to creditors. Debts may also be reorganized, which may allow you to make partial payments over a period of several years. As part of a bankruptcy repayment plan, creditors may agree to reduce your interest rate or waive late fees or other penalties.
When you have less debt, you tend to have less stress in your life. Reducing your debt may be as simple as getting a roommate or sending a letter to your creditors. Bankruptcy may also be a smart move if you have no other ways to pay down your balances in a reasonable amount of time.