Paying off your debt requires making some tough choices. There are pros and cons of each debt repayment option. Each depends on your debt, your income, your monthly expenses, the importance of your credit rating, and how much of the debt you want to pay off.

Debt Repayment Options to Consider:

Pay Your Own

You must assess your own debt, put together your own plan, and make the plan work. This might require you to call your creditors and lenders to work out a payment schedule or ask for a lower interest rate. You are solely responsible for sending monthly payments to your creditors. Your plan will include both secured and unsecured debt.

Consumer Credit Counseling

A credit counseling agency will help you come up with a debt management plan (DMP) that usually includes a lower minimum payment for each of your creditors and a lower interest rate. This usually takes about three to five years during which you are not allowed to use your credit cards. Though your credit report is updated to show credit counseling, it will not hurt your credit score.

Debt Consolidation

Debt consolidation is when all debts are combined into a single monthly payment. Some programs open a new loan that’s then used to pay off the unsecured debt. Opening a new loan requires a good enough credit score to get a new loan. Other programs operate more like consumer credit counseling and just combine your monthly payment.

Debt Settlement

Debt settlement can lower your total debt by up to 40% to 60%. You pay a monthly fee to a settlement firm who then negotiates a lump sum payment that’s less than the full amount owed. When this settlement amount has been reached the firm uses the money you’ve been sending to pay the settlement.

Debt settlement requires you to be behind on your payments. And there’s no guarantee your creditors and debt collectors will accept the settlement offer. So you may or may not receive a refund if the settlement is unsuccessful.