Perhaps the first thing you should know before you get debt reduction help is this: There may be no such genuine thing as a way to reduce debt fast.
The concept that there might be such a way often drives the debt-addled toward scams such as many debt consolidation programs that entice you by promising to eliminate your debt fast but do not actually begin paying your debt down, or actually negotiating with your creditors, until you have paid legal fees that can sometimes take as many as six months to a years’ worth of your agreed-upon monthly installment to complete.
Some debtors think a debt consolidation loan may be the answer to reducing debt fast or, at least, on simpler terms. On the surface, this may be true: A debt consolidation loan will eliminate multiple debt payments at once, enabling you to end those bothersome and often painful debt collection actions or calls. It will not impact your credit rating negatively—assuming you had a credit rating good enough to qualify for such a loan—and it may even help you improve your rating on the assumption you make this loan’s payments on time every month.
But the negatives include that you must qualify in the first place, whether for a pure loan or a second mortgage; and, you run the risk of losing your home if you put your home up as collateral for the loan or took a second mortgage on your home. Also—and this is the key—you do not exactly eliminate your debt, you merely restructure it, and you may even get a false sense of security when you do this. Enough to allow you to get yourself overextended once again if you are not extremely careful.
Debt consolidation services and consumer credit counseling may seem like an attractive option as well. As with a consolidation loan, you eliminate many if not all multiple debt payments in favour of a single monthly payment, and you can put an end to those collection calls and actions. You can also stop or eliminate entirely some of your interest and fees, depending upon your original creditors’ willingness to settle with your chosen consolidation service or credit counseling service. And, these services also teach you new money management skills, something you will not get from your consolidation loan lender.
However, the risks include your being unable to use credit while under a debt consolidation program. You also may not be able to take care of all your debt under such programs—you may not be able to eliminate some secured debt, and even some unsecured debt may not qualify. And, though you may feel that overwhelming sense of relief, the sense that you have the chance to start your financial life over again when you join a debt consolidation program or engage a credit counseling service, your program could still impose a degree of negative impact on the credit rating you want to rebuild in the first place.
Bankruptcy, of course, remains an option—even with new restrictions—if your debt is to a level, whatever that level is, where you cannot afford to retire it on the income you earn or if you are unemployed. But whether you choose debt consolidation, consumer credit counseling, a debt consolidation loan, or bankruptcy, you should choose after much due diligence, an honest assessment of your finances and your lifestyle, your personal beliefs, and a realistic appraisal of your incumbent and likely resources. And understand that you did not get into debt overnight, and you will not get out of debt overnight.
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