Are you in debt?
You’re not alone. Nearly ¾ of all Americans have debt, including mortgages, student loans, credit card, auto and medical debt. If you’re struggling with debt there may be options available to you. Read on to learn more about debt forgiveness and debt consolidation and see which one is right for you.
Debt Forgiveness
Debt forgiveness is when a lender forgives some or all the debt you still owe. Depending on what kind of debt you have there are different options. For federal student loan debt, if you work in a certain area like education or public service this may be an option. For credit card debt you can hire a third party to establish a debt management plan on your behalf. This is when you pay unsecured debt in full but often at a reduced interest rate and with waived fees. Federal mortgage debt can also provide some debt forgiveness programs through the Department of Housing and Urban Development. You can also reach out to your mortgage lender directly to ask about available options to you.
Debt Consolidation
Debt consolidation is when you combine several sources of debt, often high-interest, into a single, lower-interest payment. Debt consolidation is a great way to organize bills with different interest rates, due dates, and payments. Debt consolidation also does not typically require a third party to negotiate on your behalf, as some debt forgiveness programs do. The two most popular ways to consolidate debt are to get a 0% interest, balance-transfer credit card or take out a fixed-rate debt consolidation loan.
Drawbacks of Debt Relief
When deciding which option may be right for you, it’s important to remember that if it sounds too good to be true it probably is. Make sure to only work with reputable companies that are registered with the Better Business Bureau and can provide a written plan for you. It’s also important to know some of the drawbacks of each option. For debt forgiveness, you may sometimes be required to pay taxes on the amount that is forgiven. A debt management plan can also hurt your credit score, as creditors may initially report you are not paying your debt as originally agreed upon.
Which One is Right for You?
If your debt is less than half your income, you have good enough credit to qualify for a 0% or low-interest rewards credit card, and your cash flow consistently covers payment consolidation may be a good choice for you. If your debt is more than half your gross income and you feel you will never be able to pay off your debt it may be time to consider debt forgiveness or create a debt management plan. There is no hard and fast rule as to what type of debt relief would work best for you. It’s important to do your research and understand the consequences of each plan, including interest rates, fees, and more.
If you have debt PCU can help. Our Platinum Rewards Mastercard has a 0% balance transfer offer to help you pay off your debt faster. We also offer student loan consolidation with a .25% interest rate reduction when you enroll in automatic payment. Contact us today to take control of your debt and life today! Send us a secure message or visit any of our convenient locations in Orangeburg, New City, or Nanuet. Palisades Credit Union serves Rockland and Bergen County.
View current loan interest rates in Rockland and Bergen County.
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- How to Pay off Your Mortgage Faster
- 14 Ways A Personal Loan Can Help You
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