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Consolidation and Debt Settlement Can be Great Tools

Sep 16, 2008
Rapidly growing credit cards balances can very negatively affect all aspects of your life, as the stress caused by them can affect your personal relationships, your health, your job and even your sex life. It's easy to feel completely overwhelmed and despair over your situation, but there's always a way out. It just takes a concerted effort, and that initial push to get the ball rolling.

While the typical view of someone in credit debt is of the overzealous shopper, there can be many reasons why your credit cards got tapped. Having to force your cash resources into unexpected areas may have forced you to use your card more often than you otherwise would have. This could be caused by the loss of a job, an illness in the family, trying to pay off a school debt, a failed business venture, or any other number of circumstances. What may appear to be a short term solution often turns into a long term problem though, with interest rates piling on top of themselves to point where it seems your bills multiply each month. Even making decent sized payments may barely make a dent in the overall debt, which can be distressing.

Your first step may be to hire a financial advisor. They can take into account all of your finances and how to best utilize them to make your life easier. It's nice to have a knowledgeable person on your side, and one unaffected by emotions. People in debt often resort to drastic things to try and get themselves above water, which often only makes things worse.

Your friends or family may also be a source of advice and counsel. In fact if you can manage to get a loan from a friend, or even a lower interest loan to help pay off a high interest debt, that's a great place to start on the road to recovery.

Debt consolidation is both extremely useful, and also practical, putting all your debt into one easy to monitor and manage place. This alone can reduce the stress over debt, even if the actual amount owed is the same. Owing money to just one person or source is a lot less stressful and confusing than owing it to multiple sources. If you have a financial advisor, having them help you through this process would be beneficial. Some debt consolidation may require collateral, which may not be prudent if you're at a high risk of defaulting on the loan. This could ultimately put you in a much worse position than you're currently in, so knowing all the ins and outs of this process is very wise.

You can also look into debt settlement. A debt settlement company is one that works on your behalf for a small fee to lower the amount of your debt owing to companies. They can often reduce your net amount owed by as much as 25-50%. This settlement will negatively impact your credit score for some time, but if means avoiding bankruptcy, stress and other associated ailments, it's probably well worth it.

You can of course also declare bankruptcy, though recent changes to the law have made it more difficult for individuals to do so. This will basically give you a fresh start, protecting you from anyone you owe money to, though it will impact your credit rating for as long as a decade.

How you go about eliminating debt is up to you. You can go the slow and steady route by lower interest debt consolidation or take out a personal loan from a family member, or you can get much of it wiped out in a quick, clean jerk, at the expense of your credit score for some time to come. The good news is that you have options, they're just difficult to sort through.
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