If you’ve found yourself contemplating the best strategy to pay off your debts, you’re probably wondering which solution is the fastest too. Here’s the thing, it took some time for this problem to accrue, so it’s going to take some time for it to be fixed. That is, with the least amount of disruption to your ability to borrow in the near future. So, if you’re wondering how long does it take to ditch your debt, the answer is in as little as four months, or up to 366 or more—depending upon the method you choose.
However, the fastest way is far from the most desirable way.
Three to Four Months
A Chapter 7 bankruptcy typically takes between 90 and 120 days to complete. It can sometimes take longer if there are complications, but four months is usually the max. However, your credit record will then be decimated for approximately 10 years, so getting a mortgage or a car loan will be difficult. Ironically though, credit card issuers will be flooding your mailbox almost immediately. Why? Because they know you can’t file for protection again anytime soon and they can hook you with a low limit at a high interest rate.
Twenty-Four to Forty-Eight Months
Debt relief/settlement programs can take anywhere from two to four years to complete, depending upon a number of factors. Chief among them are your outstanding balance and your ability to fund agreements. Settlement companies like Freedom Debt Relief review your situation and negotiate with creditors to forgive a portion of your debt. This means you’ll have to build up a fund from which these payments can be made. The faster you can do this, the sooner your debts will be cleared. However, you’re not repaying the entire loan amount, so this will have a negative impact on your credit score. Still though, it will be better than filing bankruptcy.
Thirty-Six to Sixty Months
A debt management plan, executed in conjunction with credit counseling, usually takes anywhere from three to five years. The exact length will vary depending upon the extent of the debt, as well as the amount of the monthly payments you can afford. A debt management counselor can usually negotiate a reduced interest rate and fee waivers, which can make your outstanding balance smaller. But you will repay the entire principal amount. While this strategy also has something of a negative effect on your credit score, it isn’t as bad as bankruptcy or settlement.
Up to Sixty Months
The average debt consolidation loan carries a term of five years. However, it also represents one of the best solutions on this list in terms of preserving your credit rating. First of all, you must have good credit to even pursue this strategy. Perform according to the terms of the loan and you’ll come out of it with your score intact.
Up to Three-Hundred Thirty-Six Months
This one also varies according to the amount owed. However, a credit card debt of $10,000 at 15 percent interest will be around for 28 years if you only make minimum payments. You’ll also pay nearly $12,000 in interest over that period. On the other hand, your credit score will be just fine—as long as you make payments on time and don’t get in trouble elsewhere.
As you can see, when it comes to how long it takes to ditch your debt, the fastest method is the least desirable in terms of your credit score. However, the slowest method is problematic in a different way. Your best move is paying the balance in full each month. Which, of course, means you should avoid charging more than you can repay within 30 days or less.
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