We’ve all been there, many still are. How did I manage to make my escape from debt you ask? Well, there’s never a better time than now to face your financial woes and jump ship. Here are my best options for managing debt to guide you, without having to file bankruptcy. Let’s make a plan together, and you can choose the best route for you to get out of debt.
1. Some of you have already secured a 401 (k) or another form of retirement account. You can borrow money from this account to pay down your debt. This is a bold move however; disbursement is the term for those who don’t pay this loan back in its entirety. Moreover, you will be assessed the taxes and penalties associated with the withdrawal of these kinds of funds. HEre’s a tool to calculate that disbursement: http://wiki.fool.com/401(k)_Disbursement_Calculations
2. Those of you that have already made headway on a life insurance policy can borrow money against it. Unlike the above scenario, you can pay back this money on your terms. Just keep in mind that the amount paid to you beneficiaries will be reduced. This amount is equal to whatever you withdrew, so it would be advisable to pay back at some point, especially if you want to continue to make that investment you had before.
3. Borrow money from family or friends if you must. But keep in mind, while they probably won’t tack on the interest, these are relationships far more valuable than money, or even the service provided by whatever company you owe. But perhaps these relationships are so important to you that you know you could not fathom forgetting these payments, and this thought alone is what motivates you out of debt. This then would be a good thing.
4. Debt consolidation services can be an option, but keep in mind there are a wide variety available, and doing your research first is most advisable. In this scenario the debt service will negotiate with your creditors and you plans payment will go towards paying them. In this scenario though, you will maintain control of your funds and you can hope to get out of debt faster.
5. If the above doesn’t work, you can try to renegotiate your debts with your creditors yourself. The best case scenario here is that you’ll be able to come to terms with them about a lower interest rate while paying back your debts. For example, this is come to be known as a temporary hardship program. If you are in financial hardship perhaps you can lower your overall payment in the process.
All of these options come with risk. But risk is why you’re here in the first place. I think it is imperative that you focus on strategy and planning for the future. Set savings goals and meet them. If you have to cut back on the frivolous side of life, do it. You’ll be thankful when you can breathe easy and make new plans for the fun things in life.
Frank McCourt is currently trying to solve the world debt crisis. He’ll return your call in few monthes.