There are five different types of debt management programs. Which debt management solution will best work for you will mostly depend on the amount of debt you have and how disciplined you are with your money.
The first way you can approach your debt is with a self managed debt management program. This takes realizing there is a problem or the potential for financial difficulties exists. A self managed debt management solution will not work for you if you do not start early and have some control over your spending habits. This debt management program requires listing all your debts and creating a budget. You will want to pay off the highest interest accounts first and pay as much as possible towards your credit card balances. You may also consider transferring credit card balances to a credit card with a lower interest rate.
The second method of debt management is a debt consolidation loan. You must be creditworthy and will probably have to use the equity in your house as collateral. The interest paid on this loan will be tax deductible. This loan will consolidate all your credit card payments in to one monthly payment that will probably be lower than your combined payments, but the term on the loan will probably be longer. The danger with this type of debt management solution is it will leave you available credit on your credit cards. If you are not disciplined enough not to use it, you will find yourself back where your started-with credit card debt and another loan.
Your third option is to use a debt management counseling service. You will make one monthly payment to this service and they will disburse it to your creditors. The credit counseling service will get your interest rates reduces or eliminated. Collection calls will stop and so will fees and penalties. The debt management credit counseling company will deal with your creditors on your behalf. If you wait until your debt is too serious, they may not be able to help you, so the earlier you can make decisions about your finances, the more debt management options you will have.
Your fourth debt management option is to use a debt settlement company. Most credit card companies will not be willing to make a settlement on your account until your account has been charged off or at the very least is several months past due. In other words, this option is a last resort before bankruptcy. Settling on your accounts will harm your credit, but not as much as a bankruptcy. Debt settlement is when you or a company on your behalf negotiates with your creditors to settle your debts for a lesser amount. This debt management option has gotten a lot people out of debt.
Your final debt management option is to file bankruptcy. With the new laws, this means you will most likely be reorganizing your debts with the help of an attorney and the courts. Today, bankruptcy will probably not give you a fresh start, but it will make things manageable. A bankruptcy will stay on your credit report for ten years.
The sooner you are willing to evaluate your financial problems and consider a debt management solution, the greater you number of debt management options will be. Once you admit a problem exists you will then be able to make plans to correct it.