Americans are facing rough weather as far as their finances are concerned. Statistical data prove that USD$2.55 trillion is the consumer debt an individual owes in United States. This doesn’t include mortgage. With increase in the number of bankruptcy filings, foreclosures, an American consumer is no longer in the driver’s seat. The average American household has as many as 14 credit cards. And due to the liquidity crunch, plastic money is being used even for the basic needs.

Lenders have become more rigid in approving new credit to consumers. In an attempt to cut costs, the credit card companies have reduced credit limits, altered payment policies. However, the credit cardholders were not informed about the same. This led to credit card defaults and consumers had to take on additional financial responsibilities to pay off debts.

With the increase in the number of debt trapped people, the debt relief options have grown and are being widely availed by all. If you have not been managing your finances well and if any one of the following instances matches yours, you need financial rehabilitation.

• If you are finding it hard to make payments each month
• Making minimum payments is taking a toll on your financial well being and is eating away a major portion of your paycheck.
• You have started receiving calls from collection agencies
• You tend to use your credit cards to pay your utility bills.

Try to pay off debts on your own if you have a small debt amount to settle. In case your outstanding balance is too much for you to handle alone, take help of a professional. Some of the debt help options that can help you to pay off debt include-

• Debt consolidation

Debt consolidation is one of the ways you can pay off debts and lead a debt free life. In debt consolidation your debts are compiled into a single debt account and you can treat it as one. In debt consolidation, the interest rate and the monthly payments are reduced. You are given a new repayment plan and you have to make payments as per the new plan. You can consolidate debts on your own or take help of a debt consolidation company.

• Debt settlement

When you settle debts with the assistance of a debt settlement company, you make payments into a trust account and stop making payments to the creditors. When half of the outstanding balance has accumulated, you start negotiating with your creditor. It can help you to reduce the outstanding balance (you are required to pay) by 40% to 60%. Debt settlement impacts your credit score in a negative manner as you don’t make payments for sometime. Debt settlement can help you to pay off debt within a span of 2 to 3 years.

Debt settlement and debt consolidation are 2 of the most widely availed options to pay off debt. However, if you are working with a debt relief agency, make sure that they are reliable to work with.

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