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With so many people struggling financially in the United States, bankruptcy rates have been on a steady rise. The problem with declaring bankruptcy is that it can have long-lasting negative ramifications on your life. For most people, it takes over five years just to bring their credit score back from the dead. Fortunately, there are plenty of alternatives for anyone thinking about bankruptcy. Check out some of these credit repair options and see if you can avoid declaring bankruptcy.
Debt Consolidation
One of the best alternatives for anyone considering bankruptcy is debt consolidation. Using this method, your debt consolidator will take all of your various debts and merge them into just one. That means you’ll only have one monthly payment to worry about and can more easily pay back debt. Some consolidation companies may even be able to secure better interest rates from your lenders. Debt consolidation can affect each person’s credit score differently, but it can help repair credit for some.
Debt Negotiation
Another good alternative to bankruptcy is debt negotiation, or sometimes referred to as debt settlement. In this situation, you hire a professional debt negotiation firm to work with your lenders. They’ll do their best to cut a deal with your creditors that allows you to only pay back a portion of your total amount of debt. Many lenders are willing to pursue a settlement because they’d rather get back a portion of their money than none at all. One possible problem with debt negotiation though – it won’t do much in the way of credit repair and could even end up damaging your score.
Home Equity Loans
Are you a homeowner that’s been making payments on your mortgage for several years? Depending on how much you’ve paid on your home, you may have the opportunity to take out a large home equity loan. A home equity loan can help you avoid bankruptcy because you can use the loan to pay off all of your numerous debts. In almost every situation, home equity loans have lower interest rates than any type of unsecured debt. So while you’ll still have to repay all of your debt, you’ll be doing it at a lower interest rate, which can save you thousands of dollars over time.
Do-It-Yourself Plan
If you’re already teetering on bankruptcy, you’re probably looking to save money in every way possible. Employing a do-it-yourself idea may be your best strategy, but it will also require more work on your part. You won’t have professional help, but that doesn’t mean you can’t effectively pay off debt and avoid bankruptcy. Your first step should be to analyze your finances and create a strict budget that allows you to begin putting a dent in your debt. It’s also important that you call your lenders and creditors to inform them of your financial situation. Just because you’re not an expert negotiator doesn’t mean you can’t secure a better interest rate or reduced total debt.
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