If you are a college student and already racked up excessive debt, you are probably wondering how to deal away with debt. The good news is that there are different ways to eliminate debt and solve your money problems before your credit score suffers.
Debt Consolidation Loans
If you have credit cards, student loans, and other types of debt, then a debt consolidation loan may work out in your case. Many finance providers advertise consolidation loans with flexible repayment schedules and competitive rates that allow borrowers to combine different balances. A major benefit is that you will be offered a lower interest rate especially if you use the services of a debt consolidation company. They negotiate with financial institutions to secure affordable monthly payments and a reduced outstanding balance. There are no up-front fees, and borrowers benefit from a host of added features and tools such as online budget calculators, fee journals, easy access to their online account, and a lot more. While finance providers may require a co-signer in some cases, borrowers are offered secured and unsecured loans and benefits such as online enrollment and additional services such as debt settlement and debt management. There are other benefits for borrowers who opt for a debt consolidation loan, whether secured or unsecured, one being a single payment and one due date, which makes it easier to plan and avoid late payments and hefty penalty charges.
Often, the debt collection agencies are working for the credit card companies. It is best to know this beforehand. If you are given a collection agency by a third party, they can be tricky. You may be given a high interest rate and/or have additional fees added. However, it is not uncommon for the credit card companies to pursue collection agencies who are not working on behalf of the credit card companies.
Balance Transfer
This is an alternative to consolidation provided that you have credit card debt only. If you have multiple credit cards with high balances and interest rates, then you may want to look into various balance transfer options offered by major Canadian issuers and local and regional credit unions and banks. Finance providers typically feature a zero or low rate over a promotional period that varies by issuer. It can be as long as 18 months but typically lasts between 6 and 12 months. You benefit from a very low rate that allows you to repay your outstanding balances over a shorter period of time. Whether you have student, specialty, cashback, airmiles, rewards, or other types of credit cards, a balance transfer makes sense if you are offered a lower rate than on your existing balances. And it makes sense to pay the balance in full each month to benefit from the promotional period.
Other Options
If you have student credit card debt, there are other options to consider and repay your balances faster. These include credit counseling, negotiation with creditors, debt restructuring, individual voluntary arrangement, and formal proposal to your finance providers. The choice of a financial instrument depends on how you handle debt, types of outstanding balances, amounts owed, individual preferences, outlook, credit score, and other factors. If you use the services of a financial counselor, you will discuss your money problems and the best way to handle and avoid debt in the short and long term. Consolidation is one option to simplify payments and budget and cover interest charges and the principal. Bankruptcy and debt relief are alternatives. While bankruptcy is really a last resort, borrowers who opt for debt relief enjoy the fact that a portion of their debt is forgiven which makes repayment easier and more manageable.