At any time in life, it is very easy to acquire debts that may be difficult to payback when due. Sometimes, this debt can become completely overwhelming which can further exacerbate the problem. When you’re trying to run a business, this problem is even more profound.
However, in order to get back on track, you must take a proactive approach rather than putting it off which will only end up putting you further in debt.
There are several options that you should consider in order to take care of the debt. Depending on how much you owe, who your creditors are, your present financial situation and whether your creditors are willing to work with you will most likely determine the path you take.
It also depends on what you’re looking do. Are you looking to buy a home and need to take care of all debts right away, or perhaps you’re just looking to repair your credit and improve your FICO score.
Or maybe you’re just tired of getting those creditor phone calls throughout the day and just want to settle up.
Talk to Your Creditors First
The first thing you need to do is speak with your creditors to see if they are willing to work out a payment plan. You may be surprised to learn that just speaking with your creditors and letting them know about your situation will help you get a more favorable interest rate.
They may even let you split up the payments so you don’t have to pay a big amount at once. Your best option is always to first speak with the creditors so keep that in mind before proceeding to the next options.
Many people who fall into debt work with a third-party agency that specializes in debt consolidation. These services make it much easier for you to repay the debt because they combine all your debt into one simple payment which you would then make once a month.
This payment is sent to the debt consolidation company who then sends out the payments to each of your creditors on your behalf. Most debt consolidation companies have already worked out a lower interest rate with the creditors which can help save you money. However, keep in mind this service will hurt your credit in the short-term.
Debt Settlement Might Be an Option
A choice that many are electing to do today is debt settlement. This is where you settle with the creditor at a reduced rate where you pay them in a lump sum. Although this will save you money, perhaps a substantial amount it will not look good on your credit report.
There are debt settlement companies out there including lawyers who will help you settle the debts for pennies on the dollar.
Your final option is bankruptcy but that should be the last resort because that will stay on your credit report for 7 years. You may have no choice but to file, however, not all debts can be discharged through bankruptcy, plus you will need to pay lawyer fees and court costs.
As you can see there are options to repaying your debt, but in every one of these situations, the people who are proactive are the ones who get out of debt the quickest. Speak with your creditors first, be honest with them and more than likely they will be happy to work with you.
After your debts are cleared, you can truly focus on running and growing your business without always have the debt in the back of your mind. You’ll be free to focus 100% on your business.