Debt happens. It is important to fix the problem, but it isn't the end of the world. Most people go through a rough patch in their finances at some point, and most people get through it. They key is taking advantage of the resources that are available and picking the right ones to get back on track.
Get Your Bearings
The first thing that you should do is take a moment to make sure you understand your situation. After all, you can only figure out which choice is right for you if you understand your needs.
Make a list of all of your outstanding debts and their interest rates and plot out your current budget. Once that is done, make a list of your goals so you know where you are trying to go. That will give you the information that you need to figure out which of these options will get you to your objective.
Credit counseling is a type of program that credit card companies developed to help people who have a lot of credit card debt. The companies offer a lower interest rate and a payment plan that puts more of each payment towards reducing the debt. They can also provide help building a budget, financial counseling, and other services.
They also come with a few conditions. You cannot use your credit card while using these plans. Some people have trouble qualifying for the help, and while these programs do reduce interest rates, they don't reduce the total size of the debt. Defaulting still carries penalties, and your credit score can take a hit. Those factors mean that while credit counseling can be a good fit for some people, there are usually better options.
Home Equity Loans and Lines of Credit
Home equity loans and lines of credit are a debt consolidation tool. They can be a good fit for people who made some borrowing mistakes but still have a fairly high income relative to their payments and own a home.
A home equity loan allows the borrower to refinance their mortgage in return for a cash payment, which can be up to 80% of the home's value minus the outstanding value of the mortgage. A home equity line of credit is similar, but it is essentially a normal loan with the house as collateral. Borrowers can then use that cash to pay down other debts. That saves money if the home equity loan has a lower interest rate, but that comes at the risk of foreclosure for people who struggle with that payment.
Debt settlement is often the best tool for getting out of debt. Most lenders are willing open to negotiating with people who are struggling to make payments. They would much rather take a smaller payment and be sure of getting some money back than demand all of it and risk having the borrower default. This does count as settling the debt for the purpose of your credit score, although it does not repair damage that has already been done.
The process is simple. Most people choose to work through a debt settlement agency that has experience with negotiations. That agency will work to negotiate the best deal that they can. Once they reach a settlement, you can pay the reduced total to settle the debt. That ends the matter and gives you a chance to move on to a better financial future.