Debt Views

You have options when you want to legally eliminate debt, but most of these options have negative effects on your credit score. I will start out with the worst option of them all. It will have the worst effect on your credit. The last option I give will be your best option and will help you to maintain a good credit standing.

The first option is bankruptcy. It is the number one option most people think about to legally eliminate debts There are many people who see no other option than to file for bankruptcy. Their reasoning is that after 7 years it will not longer be on your credit report. This is not true. Bankruptcy is a 10 year mistake. It has the most damaging effect on your credit because you are admitting to the public that you can not pay for your debts. Not only is this very humiliating, but it will be extremely hard for you to even get a credit card for the first two years. You will also continue to pay the highest interest rate which in turn costs you more money than if you had not filed for bankruptcy.

The second option is debt consolidation. Debt consolidation is where you roll all of your debts into one loan. You may not think debt consolidation as a way to legally eliminate debt, but it is. The only way debt consolidation helps is if you can find a loan that has a lower interest rate than the debts you are paying off. Also, you will need some type of collateral to put up for the loan. If you are a home owner you could likely get a home equity loan, but the interest rate will probably be high. Many people who get debt consolidation loans feel the relief of a lower monthly payment at first because the monthly note is generally lower than all the monthly credit card minimum payments. When they realize they have extra money they start spending it and are soon back in debt up to there ears again. Debt consolidation only works for people who are responsible enough not to get back in debt.

The third option is the best option. This option is called paying your debt strategically. You are probably aware that you have to pay more than the minimum payment each month if you want to ever get your debt paid off. The secret to this method is knowing how to pay your debt and when to pay it. You may also think you have to make more money to pay more on your debts. In fact, if you know the secret to paying off your debts you can do it without ever getting a second job. Paying off your debt using this method also helps you to increase your credit score each month.