In a few short words, like any important decision you make in life…educate yourself before choosing a solution to your debt problem. The more you know and understand about your options, the risks and benefits of each, and how each solution may impact your financial situation short and long term, the better off you will be.
It’s a big decision as all financial ones are so don’t rush into it blindly.
A few of the many questions to consider:
- What monthly payment can I reasonably afford?
- How long until the chosen program pays off all my debt?
- What costs are involved and how are those handled?
- What are the negative implications of the debt solution I’ve chosen?
- How will this impact my financial status (credit score, employment, family obligations/goals)?
- What are the effects on my tax bill?
- How can I alter my lifestyle to stop the debt accumulation?
- What’s my new budget for living essentials (food, housing, gas, etc.)?
- What can I do to prevent another excessive debt accumulation after this debt is repaid?
Of course, there are many others but this will get you started in terms of what questions you need to consider/answer as you seek out the best debt solution for you.
Now that you have your list of questions to consider, it’s time to learn all about the solutions and through a process of knowledge accumulation, narrow down your preferred solution.
Let’s break it down into a few steps:
- Read about what options are available to you broadly speaking, debt consolidation, debt negotiation, or bankruptcy. Which sounds best to you? Which are you most comfortable with?
- Once you’ve prioritized your solution preference, see if it’s available to you given your debt type and situation. For instance, you can’t get rid of student loan debt through bankruptcy. Similarly you can’t negotiate for a reduced balance on your home or auto loan.
- Research a list of reputable organizations who can answer your questions about the solution you prefer. If you think negotiation is a good route for you, make a list of 3 companies you’ve researched and seem reputable (use the BBB.org website as a reputation reference)
- Interview each one with a list of questions based on your specific situation and research. Don’t get sold as the first conversation should be a fact finding mission for you not a sales call. If the person you are speaking with doesn’t understand that then they may not be the right organization to help you. Be cautious.
- Digest the information, do additional research on both the solution you’ve chosen and the companies you’ve spoken with.
Take action only once you are totally satisfied with your ability to make an informed decision about the type of solution that’s best for you. It’s a big decision and getting out of debt for most solutions takes years, not weeks or months. So tread carefully and commit yourself to whatever solution you’ve chosen.
Remember, millions of people get into debt trouble every year and millions of people also successfully get themselves free from debt every year too. You can be one of them.