Preserving your credit score while repaying debts

People in debt may be tempted to declare bankruptcy as a way out of their mounting obligations. As an option, however, declaring bankruptcy is far from the ideal recourse and should not be considered lightly. It is only often in truly dire circumstances when the consequences of filing for either Chapter 7 or Chapter 13 would be preferable to continued debt. 

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Frequently, however, the side effects of bankruptcy are themselves damaging to one’s credit score, making future financial assistance impossible to acquire. Bankruptcy also leads to the liquidation of most assets, including those dear to the owner. 

Rather than avail of the last resort, debtors can instead pursue other debt resolution strategies, which would allow them to pay off their creditors in a timely manner without damaging their credit scores in the long term. 

Most forms of debt relief involve consolidating multiple payments to other parties into one that can be paid off at a more flexible or reasonable time. This can range from taking out a loan to be used to pay off other creditors, to working out a more reasonable lump sum or terms of payment to a creditor.  

Often, creditors are more than willing to make flexible concessions to ensure cash flow. If the reworked payments are received on time, one’s credit rating is not negatively affected. 

Those with debts that may be too difficult to track, but are not unpayable, may opt to have their debts managed by professionals. 

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Consolifi provides debt settlement services to help people get back on track with their finances. Visit this website for more on the advantages of debt settlement.

Small steps: A close look at everyday debt-reduction strategies

One of the many goals of people today is to be free of debt, a herculean task but not an impossible one. There are many everyday ways to cut down or even eliminate debts. 

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“Pay more than the minimum” is perhaps one of the best words of advice for people with accumulative debts like credit cards. Paying only the minimum monthly balance allows interest to gradually accrue on your debts, which can lead to hefty interest payments that approach or far exceed the original principal. Paying more than the amount covers both the principal and part of the interest, gradually paying off both. 

When faced with multiple debts, a variation of this strategy can be used, diverting the greatest amount of funds to pay off the smallest debts and working upwards from there. The larger debts are paid at a minimum until the smallest debt is paid off, upon which the debtor diverts more funds to the next smallest debt in line. 

In many cases, where paying for all the outstanding debts would take too long (and thus cost too much), a debtor may instead opt to consolidate the debts into a single fund. On their own, debtors with a sufficiently sterling credit rating can accomplish this by taking out a personal loan, which would be used to pay off the creditors all at once. 

Finally, debtors can resolve their debts much faster by budgeting. Increasing cash flow and cutting back on expenses (sometimes to just the essentials) can help muster the cash for quicker debt payments. In addition, more conscientious spending can prevent debt. 

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Complex debt issues may require professional assistance. Learn more about debt settlement and its advantages from the Consolifi website.