The Best Ways to Eliminate Debt

Short of filing for bankruptcy, the best ways to eliminate debt are debt consolidation loans, consumer credit counseling, and debt settlement. All three are meant to lower your monthly payments and pay off your debt in a shorter time period, but that is where the similarities end.

Let's first look at debt consolidation loans as the first debt elimination option. You can use this for almost any type of secure or unsecure debt. One negative is that most debt consolidation loans do require collateral and good credit. This can be a deal killer if you have bad credit or lack equity in your home. If you do qualify, you'll typically be debt free in just 3-5 years (depending on your debt amount), which is much better than the 30 plus years it takes by making just the minimum credit card payments.

The second best way to eliminate debt is consumer credit counseling. With credit counseling, the agency renegotiates with the creditor to change and lower your monthly payments from compounded to simple interest. Your monthly payments will drop a bit less than you're currently paying, but most importantly, depending on your debt amount, you'll be pay off your debt (depending on amount owed) in just 3-5 years.

The last and most popular way to eliminate debt is debt settlement. It can be only used in consolidating unsecure debt such as credit cards, medical bills, and collection accounts. It cannot eliminate secured loans like home or auto loans. The process works by having a debt settlement agency negotiate with the creditors to reduce your debt by as much as 60%. Then a monthly payment is set up that is usually half of what you're paying now. Most importantly, you'll settle the debt in 2-3 years! One negative of debt settlement is your creditor will report your accounts as late until they are settled. This is still as an improvement over filing bankruptcy that stays on your credit record for up to 10 years!