Tuesday, April 9, 2013, AM | 8 Comments
Getting out of debt can take years and there are many ways to achieve the same goal. Paying a little bit extra each month will get the job done but in reality, the goal of living debt free is a long ways away.
There are alternatives that can speed up the process and get consumers out of some sticky situations as far as high interest rates and overwhelming late fees are concerned.
But each one holds its own consequence in getting the job done quicker, usually in the form of a negative impact on a credit score.
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Attempting to pay off debts without any assistance is not going to affect a credit score negatively. When the minimum payment is made each month, things tend to stay the same.
However, if while trying to pay off one, a person misses a payment on another, this could cause a late fee, an increase in interest rate and a negative impact on the credit score. This is also the method that tends to take the longest.
Getting the courts involved in debt negotiation can absolve some of the debt, reduce the amount of debt, or allow for a special payment plan.
While these are all good, there is a negative effect on a person`s credit score, regardless of the type of bankruptcy filed. Chapter 13 bankruptcy, the option that includes paying off some, if not, most of the debt, is often easier to recover from financially when it comes to a person`s credit.
There are several different ways to consolidate debt. Some people choose to work with one company to pay off all the other loans. They are left with just one debt that they are responsible for and the balance is the combination of all the other debt.
In most cases, the interest rate is lower, making it quicker to pay off the debt in general.
On a positive note, paying off cards that were always being paid late or cards that were close to the limit helps with a person`s credit score. On the other side, there is now a new loan that is being reported on the credit score.
Getting help from a professional does not negatively impact a person`s credit. Nothing is reported to anyone else and the meeting is usually confidential.
On the other hand, when a person makes a payment to the counseling agency and allows them to make the payments to the creditors, there is a chance that it could negatively impact you with some lenders.
At this point in time, it does not matter much on the actual credit report. The only negative aspect of counseling could be the requirement to close out the cards once they are paid off.
Closing lines of credit, especially if they were established a long time ago, can cause the score to decline.
Settlements are fairly tricky. Lenders don`t like to use this option with individuals that are paying their bills on time and in the correct amount.
In order to enter into this type of debt relief, a person must skip payments for several months and then talk to the creditor.
Obviously this is going to be a problem for the credit score. Once the balance is paid off, if it is less than the original balance, it will be marked on the credit report.
With all of the options for debt relief available today, each person should check out the options and make their own decision. Every situation is different and it makes sense that one method will work well for some but not all consumers.Facebook.com/doable.finance