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If you want to get out of debt, you’ll have to make some difficult choices. The first is which debt repayment option you will select. Each option has advantages and disadvantages, and the best option for you is determined by your debt, income, monthly expenses, the importance of your credit rating, and the amount of IVA online debt you want to pay off. Consider the following six debt repayment options.

Credit Counseling for Individuals

A credit counselling agency Stepchange will usually work within your budget to come up with a monthly payment that is affordable for all of your unsecured debt. A debt management plan (DMP) will be set up for you by the credit counselling agency, which will usually include a lower minimum payment for each of your creditors as well as a lower interest rate. Depending on how much debt you have, credit counselling with a DMP usually takes three to five years. 1

It’s important to note that you can’t use your credit cards while on a DMP. Your credit report will be updated to reflect your participation in credit counselling, but it will not affect your credit score.

Pay for Yourself

Assessing your debt, putting together a plan to pay off your debt, and making the plan work are all part of paying on your own. You might need to contact your creditors and lenders to work out a payment plan or to request a lower interest rate. If you choose this option, you will be responsible for paying all of your creditors on a monthly basis. It is entirely up to you how and when you pay off your debt. Both secured and unsecured debts will be included in your debt repayment plan.

Consolidation of Debts

Consolidating your debts into a single monthly payment is what debt consolidation is all about. Some debt consolidation programmes require you to take out a new debt consolidation loan to pay off your unsecured debt. To get a new loan, you’ll need to have a good enough credit score. Other programmes are more similar to consumer credit counselling in that they combine your monthly payments while keeping all of your existing loans intact.

Debt Consolidation

You pay a monthly fee to a debt settlement company, which negotiates a lump sum payment that is less than the full amount you owe. When a settlement amount is reached, the debt settlement company pays the settlement with the money you’ve been sending.

To be eligible for debt settlement, you must be behind on your payments. There’s also no guarantee that the settlement offer will be accepted by your creditors and debt collectors. If the settlement is unsuccessful, you may or may not receive a refund. Keep in mind that, according to the American Fair Credit Council, the average settlement percentage is 78 per cent. Consider the possibility of having to pay taxes on the forgiven debt.

Bankruptcy 

Chapter 7 bankruptcy allows you to discharge all or part of your unsecured debts. To show that you don’t make enough money to pay off your debt on your own, you’ll have to pass a means test and go through credit counselling. You may have to give up some of your assets to pay off some of your debt, depending on your state’s laws. If you have equity in your home or car, this includes them. In bankruptcy, the majority of your unsecured debt can be erased or discharged. Child support, tax debts, and student loans, on the other hand, cannot be cancelled. 

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