Debt does not discriminate; it is a financial state that affects everyone from all walks of life. Debts can be acquired piecemeal or in lump sum, it can be acquired thru a loan, credit card, contractual obligations, etc. Most debts when they become due and demand-able have a penalty clause in case of nonpayment. The clause may allow the principal debt to incur interests as well as other penalties. What is worst is that in some cases unpaid interest gets added to the principal and also earns interest. This article will discuss how one can go about paying off debts.
How to Pay Off Debt the Hard Way: Lump Sum Payment
A lump sum payment means you pay the entire debt at one time. This is actually the best form of payment if you have a lot of extra cash on hand. The problem is you would not have gotten in debt in the first place if you had the extra cash. The advantages of making a lump sum payment is that you can easily get a discount from your creditors and you do not have to pay additional interest and charges.
How to Pay Off Debt the Hard Way: Negotiating and Budgeting
Some individuals prefer to talk to their creditors and ask for an accommodation to slowly pay off their debt on installment. The problem with this approach is that you have to ask each and every one of your creditors and even assuming they all agree that you have to keep a payment schedule since not all of them will be paid the same amount at the same time.
How to Pay Off Debt the Easy Way: Debt Negotiation and Consolidation
If you are earning a regular income and you are absolutely committed to paying off all your debts then you may want to consider debt negotiation and consolidation. In sum debt consolidation means you take out a loan to pay off all your debts at the same time and then pay off the loan on installment basis from only one lender.
The effectiveness of debt consolidation can be further increased by debt negotiation, which can be done by you or by your lender or even by a third party. This entails asking all your creditors for a discount after assuring that they will get paid. The advantages of debt negotiation and consolidation can be summed up into five parts:
- Negotiation lowers each debt thereby lowering the total debt owed.
- Consolidation instantly pays off all the debts owed from all creditors who take part in the negotiation and consolidation process.
- Consolidation loan payment is made on installment basis.
- Interests as well as penalties stop. This means the total debt owed does not increase.
- You repair your credit rating.
Debt negotiation and consolidation is a viable solution, however to make it more effective take note of the following tips:
- Shop around for different lenders and do not be afraid to pit one against the other.
- If possible avoid paying for debt negotiation because some lenders are willing to negotiate for you.
- Make sure to get an installment plan that works for you and then pay on time and in full.