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Various studies and surveys estimate that 75% to 80% of Americans have some type of debt. From mortgages to car loans to unpaid credit card balances, the typical U.S. consumer most likely owes some amount of money. Debt is normal, but what if your debt gets large enough to become out of the ordinary?

Step one: Know your options. Consumers looking to get a handle on their debts have many choices these days. Even better, most of them are practical rather than drastic.

So how do you get out of debt, or at least get your debt under control? Start by taking a look at some of your options for debt management.

Personal loans

Many lenders offer personal loans for debt consolidation and credit card debt.The potential benefits of this type of debt management include:

  • Lowering monthly payments
  • Reducing what you pay in interest
  • Improving your credit score

If you’ve made diligent progress in paying off the personal loan, you may even be eligible to refinance at a lower interest rate.

Before making a decision, try using an online tool like the Bankrate Personal Debt Consolidation Calculator. You can simulate multiple payment plans and get a better idea of whether a debt consolidation loan makes sense for you.

At the same time, debt consolidation loans don’t fit every situation. You’ll need the discipline to repay the loan so that you can avoid accumulating more unpaid debt and defeating the purpose.

Also, remember that the loan can be secured or unsecured. With a secured loan, you’ll have to put up collateral such as a car or house. Some consumers manage debt by using the equity in their homes to obtain a home equity loan or home equity line of credit (HELOC).

Balance transfer credit cards

A balance transfer credit card gives you the ability to move debt from your current credit card to a new card that offers a more favorable interest rate.

Most balance transfer credit cards have an introductory period of 0% APR (Annual Percentage Rate), giving you a limited window of time to pay off the transferred balance. The intro APR periods typically range from 6 months to 12 months, or in some cases as long as 18 months.

A balance transfer card may offer the answer to your credit card debt, although no solution is foolproof. Consider some possible snags or drawbacks you could encounter:

  • You would need to pay off the balance before the introductory APR period ends to avoid paying the regular APR, which may fall in the more familiar 14% to 25% range.
  • Some of these cards require good or excellent credit. The credit requirements make a balance transfer credit card best suited for a proactive debt management plan that you put into motion before you get in serious trouble.
  • Be wary of making the balance transfer card your primary card. Although it may offer 0% introductory APR on balance transfers, the same grace period might not apply to purchases. Check all the terms and restrictions before signing up.

A balance transfer card also requires the same kind of fiscal discipline as a personal loan. To see the benefits, you’ll need to stay focused on paying off the debt.

Debt relief companies

Debt relief services, sometimes called debt settlement or debt resolution, specialize in negotiating with your creditors to reduce the money you owe them. Using a debt settlement company typically involves this basic process:

  • The money that you would normally send to your creditors as payments instead goes to the debt relief company, along with fees for the service.
  • When your accounts become delinquent, the company begins negotiations with the creditors (or with collection agencies, as the case may be).
  • The settlement comes from the payment money you’ve been sending the debt relief company, minus the company’s fees.

Before you consider using a debt relief company, remember that defaulting on your debts will affect your credit score negatively. The process could take years to complete, and success is not guaranteed.

Observe the same smart-shopping rules that you would follow for any other service, including getting the full picture on fees and restrictions. Established companies such as Freedom Debt Relief and National Debt Relief prominently advertise their credentials, which may include Better Business Bureau accreditation.

Should you declare bankruptcy?

Put bankruptcy in the category of last resorts and last-ditch efforts. Although it can provide relief for people in serious need of debt management, bear in mind that declaring bankruptcy:

  • Can be expensive. Basic filing fees generally fall in the $200 range, but hiring an attorney (which you probably should) will cost a lot more.
  • Does a serious number on your credit. A bankruptcy filing could stay on your credit report for up to 10 years.
  • Doesn’t work like a magic debt wand. Bankruptcy can discharge many kinds of debts, but not all kinds in all cases. Eliminating student loans through bankruptcy, for example, requires the debtor to meet a high legal threshold.

Still, some cases of severe indebtedness may offer no other option. Seek the advice of a financial adviser and an attorney before taking this big step.

To get more information, you can read articles by Bankrate’s Justin Harelik, The Bankruptcy Adviser, or check out this Bankrate video on common bankruptcy myths:


What are some other debt management resources?

  • Credit counseling. Many nonprofit agencies offer instruction in sound credit practices. A simple online search for credit counseling services in your area can get you started.
  • Debt management apps. Mobile apps such as Debt Free for iPhone and iPad can help you keep track of what you owe and when payments are due.
  • Online resources. The Internet has no shortage of advice for consumers, including resources offered by Bankrate also offers tools such as the Credit Card Payoff Calculator to help you figure out how long it would take to become debt-free.