Filing bankruptcy isn?t for everyone. If you have several assets, plan to buy a home, or not enough debt to file, you need to explore other avenues that allow you to repair your credit. If you have bad credit due to debt and you want to fix it without filing bankruptcy, here are 4 steps for paying off your debt.
Refinance your home
If you have a large chunk of your home paid off, refinancing your home will allow you to lower your payments and use some of the money you?re saving to start paying off your debts. When you refinance, you?re basically financing what you have left to pay off, and starting a loan term over from the beginning. If you have five years left on your mortgage, you don?t have to start over with a 30-year loan.
You may be able to refinance into a 10-year loan and practically cut your payments in half. If you don?t mind stretching it out even further, you may be able to do a 15-year loan with very small payments. It may be frustrating to add time to your mortgage, but it?s worth it if you can avoid filing bankruptcy or even possibly foreclosing on your home.
Get a Consolidation Loan
You might have not even considered a loan because your credit is poor; however, companies who offer these loans expect people to have bad credit. While they still have credit standards, they are much lower than companies that offer traditional loans. A consolidation loan is a great tool for paying off your debt because you can start building credit immediately.
It could take years to pay off your debts one at a time. Throughout those years, the debts you haven?t gotten to yet are still eating away at your credit score. By the time you get everything paid off, your credit score will be much lower than it would be if you consolidated your debt. While paying off your debts will raise your credit score, it will drop much lower before that happens.
When you get a consolidation loan, you get a loan for the amount of the debts you owe, or as close to it as possible. Once you get the loan, you use the money to pay off everything. If you can get your creditors to accept less with an immediate payoff, you might have money left over to send back and you?ll have less to pay off.
This way, you can start building your credit score and you only have one bill to worry about paying. Before you know it, you?ll have your debts paid off and you can even start investing in your future by looking into startup ventures like venture capitalist Hiruy Amanuel.
Cut back on expenses
This is the age of technology. Most people have smartphones, high-speed internet, and digital cable or satellite. It may seem like you can?t live without all of those things, but you?d be surprised what you can sacrifice when you have to. Cut back the bills that aren?t necessary for survival.
First, think of other ways to watch television. You can buy a digital antenna for your home. It will provide you with local channels without the monthly bill. Antennas come in mileage. For example, you can buy an antenna that picks up channels 50, 100, 150, or more miles away. Pick one that will reach to the closest major city for the largest number of clear channels.
If you have a smart TV or gaming console, you can purchase monthly memberships to television streaming companies for only a few dollars a month.
Finally, check your internet connection speed. Make sure you aren?t paying top dollar for the fastest speed available. Unless you have a home business that requires it, it?s unnecessary. Switch to the lowest speed and see how that works for you.
Negotiate with creditors
Before you start writing checks for the bills coming to your home, call your creditors. Creditors are always willing to negotiate. You can save hundreds on each bill that you have just by calling and asking them for a settlement amount. Sometimes you can counter-offer and they?ll agree to the amount that you give them as long as it is reasonable. After negotiating with all of your creditors, you may knock thousands of dollars off your debt. Just be sure to make the payments that you agree to. The settlement amounts can disappear and you may end up with the full bill if you don?t stick to your payment arrangements.
Call a credit counselor
Credit counselors are skilled individuals who can offer you advice on paying off your debt and rebuilding your credit. Some agencies will even contact your creditors for you to negotiate your debt. The credit counselors will put all of your bills together and tell you exactly how much to pay and how often. Credit counseling services are very helpful when you feel like you?re drowning in debt and have no idea how to get out.
Bankruptcy is not your only option. Paying off your debt is possible as long as you take the time and do the work. Call a credit counselor, negotiate your debts, sell your valuables, and cut back on expenses. It may seem like a hassle, but once you?re debt free, you will be happy you took the leap.