A vast majority of people in the United States and Canada are living in debt. In the U.S., the average person owes about $90,000 while the average consumer debt for Canadians is about $70,000.
Clearly, most of us rely on loans to keep going. There’s nothing wrong with this, though. Loans are a handy financial tool, especially when you want to purchase big-ticket items.
However, there’s something nagging and enslaving about being in debt. Sometimes you just want to clear it all be debt-free.
But what are your loan repayment options? How can you actually pull it off?
Here’s a guide:
Why Would You Want to Cancel Your Debt?
Canceling debt is another way of saying you want to get rid of your debt.
Getting rid of all your loans is no small feat. You can’t say you have achieved true financial freedom if you’re still servicing loans here and there. As such, canceling your debt is a key step in your quest for financial freedom.
Another important reason you’d want to clear your debt is to raise your credit score. If you’re hitting big credit card balances month over month, your credit score will probably drop. The same goes if you’ve got loans that are in default.
Clearing your debt will have a big impact on your credit score.
You could also want to cancel your debt if you’re planning to go in for a big loan, such as a mortgage. Most lenders don’t want to see that you have other active loans because the more loans you have, the higher your chances of defaulting.
How to Cancel Your Debt
There are a couple of ways to cancel your debt.
The path of least resistance is to follow the repayment option your lender provides. For instance, if you’ve got a personal loan, for instance, you can just repay your outstanding balance right now and the debt will be canceled.
Repaying your debt earlier typically means you’ll only need to clear the outstanding principal amount. The interest is waived. Early repayment terms and conditions vary from lender to lender though.
Another option is to take advantage of the lender’s debt forgiveness programs. Most lenders run these programs, but it’s incredibly difficult to qualify. If you do, however, you might just have the debt off your back.
There’s a third way to cancel your debt. Filing for bankruptcy.
Let’s be clear. Bankruptcy won’t clear all your debt, but there are loans that could be discharged.
Applying for bankruptcy is a momentous personal and financial decision that will have far-reaching implications for several years. Get professional advice before moving on with this option.
Full Loan Repayment Is the Way to Go
Loan repayment is a must, and it’s the easiest and most straightforward way to cancel your debt. However, there are also other options, such as seeking debt forgiveness and filing for bankruptcy. Choose wisely.
