What are the Alternatives to Debt Consolidation?

If you are ineligible for a debt consolidation loan or you have had your applications rejected by the lenders, there are various alternatives to debt consolidation that you can explore for financial relief.

What is debt consolidation?

Debt consolidation, by far, provides the most effective and popular option that you can use in attacking and managing debt that is unsustainable. It is an important financial instrument that is used by many people to help them understand their debt problems, focus on it and eventually eliminate the debt through a manageable and simpler payments plan. They are quite beneficial but they are not the only options which are available for you. There are many alternatives to debt consolidation which you could deploy. Here is a look at some of the good alternatives to consolidation loans which you can use in order to eliminate all your debts.



Debt agreements

Also called Part 9, debt agreements provide the best alternatives to debt consolidation loans that you can use in managing your debts. They are formal agreements which the debtor will make with their creditors where they will arrive at a compromise on how the debtor is going to repay the loan. The debtor will generally be looking for better terms that will make the debt less costly and manageable.

The debt agreements provide effective solutions to people who are having a lot of difficulty in meeting their financial goals and are probably locked out of consolidation loans too. There are many benefits that you will get when you opt for the debt agreements. These include the following:

·         You will be able to stop the court-imposed remedial action with regards to your debt.

·         Securing a formal debt agreement with your debtors enables you to stop harassments by the debt collection agencies.

·         The agreement allows you to put a freeze on your interest charges and in the process save thousands of dollars in interest repayments.

·         It allows you to combine all the unsecured debt expenses into a single manageable debt repayment amount.

Informal debt arrangements

Debtors can get into informal arrangements with their creditors in order to make their debts more manageable. However, it is important to note that not all creditors will agree to these informal arrangements. Once you have contacted your creditors and place a request for these arrangements, many will be willing to assist you in managing your debt.

Personal Insolvency Agreements

With a Personal Insolvency Agreement, it will be possible for you to come up with proposals for a compromise with your creditors. It allows you to take greater control of the financial situation that you are but you need to be cognizant of the consequences of entering into such agreements. They also have very specific requirements that you have to meet before the creditors can agree to your proposals.

Mortgage refinancing

Mortgage refinancing is also an effective way of getting out a financial rut if you are struggling to meet your mortgage payment obligations or if your mortgage repayments are contributing to making your debts unmanageable. Under mortgage repayments, you will be able to repackage the mortgage repayments from all the debts into a single payment option under a plan where you will likely pay a lower amount per month that you find manageable.

Whatever remedy you choose to manage your difficult financial situation, ensure that you fully understand its implications on your financial status.