Carrying a large balance on your credit card or other high-interest credit can be very expensive. An installment loan at a lower interest rate may be a smarter option to pay down or pay off your higher interest credit cards.
Ask your creditors for a lower rate or flexible payment plan.
Refinance your private or government student loans.
Shop for credit cards with better terms or balance transfer promotions.
Check with your bank or credit union for good customer programs.
Cash in your rebates or points towards upcoming payments.
Refinance your auto loan to a lower interest rate.
Get the assistance you need. If you are struggling to pay your bills, bankruptcy isn’t necessarily your only option. Debt consolidation with an installment loan may allow you to pay off your high interest loans and credit card debts without declaring bankruptcy. Writing one check each month also makes it easier to manage your cash flow by paying less interest and finance charges every month. However, not everyone can qualify for a low-interest installment loan and so this may not be an option for you.
List all your debts such as credit cards, medical bills, retail store cards, car loans, student loans, etc. For each debt, list out the current interest rate and how much you still owe. Determine how much you are paying each month. Are you paying only the principal, the minimum balance, or less than what is owed each month? Once you have the total amount needed to pay off the loans, consider an installment loan with a lower combined interest rate as a way to save money and time every month.
You’re not alone on the journey to managing debt. Seek financial guidance to get control over your expenses. Bankruptcy should be a last resort to avoid years of recovery.
Debt settlement is a legal way to pay less than you actually owe. Debt settlement companies will try to negotiate a lump sum settlement with your creditors to reduce your total amount of debt for a more realistic payment based on your income. Creditors often agree to a lower amount of money as an alternative to no repayment at all. Consumers will then pay a specific amount per month to the settlement company until they accumulate enough to pay the debt and the associated fees. Fees are set by the service provider you use and can be a percentage of your total debt, the debt reduction amount, or a monthly program fee.
Remember to consider the effect that settling your debts may have on your credit score. According to the American Fair Credit Counsel, it can take 2 to 4 years to finish the program and be debt free. Your credit score may be impacted in the short term, but the process could help you rebuild your credit over the long term.
Use caution, however, as some debt settlement companies over-promise and under-deliver.
Billing for fees before the debt is settled.
Claiming “new” government programs helping consumers.
Promising to eliminate debt without repayment.
Implying you won't need to deal with your debtors.
Promising no calls from debt collectors or dismissing law suits.
Credit counselors are understanding of your financial situation and may be able help you reduce your debt while helping you develop financially responsible spending habits. They are experts in budgeting, debt management, financial education, and payoff planning. Be prepared to discuss your finances in detail including your income, household expenses, and existing debt. They may recommend that you enroll in a Debt Management Plan (DMP) to make a monthly deposit with a credit counseling company who helps you pay off your unsecured loans. DMP’s can often negotiate a lower interest rate or get fees waived as part of a repayment plan.
Some nonprofit firms, local banks, credit unions, housing authorities, and even local universities provide credit counseling to help people deep in debt. Some of these services can even be free! Go to justice.gov for a list of approved agencies.
An installment loan can help you consolidate debt into one manageable payment. Be sure to catch up on accounts that are delinquent. Once your debt is consolidated into smaller payments, don’t take on more even if it is offered to you.