The stress of owning money can keep anyone up at night, fortunately there’s different debt repayment options that can help you pay down your debts faster than you might think. A young professional, in theory should have an easier time paying off student loans, and credit card debt. However, someone who has abused credit for many years and is now struggling to keep up with payments may need to take more drastic measures.

Which option you choose will depend on various factors including; how much you owe, your income, your current expenses, and your credit rating. Making the right choice can be tough and it may require you to make sacrifices, but at least you have options.

There are many debt repayment options

Debt repayment options that help

Debt repayment plan – Regardless of how much debt you may have, it’s a good idea to have a debt repayment plan in place. This isn’t anything special, it’s simply a plan to help you get out of debt. Some people prefer to pay off their highest interest credit card first, while others prefer to pay off their lowest balance; the idea is to have a plan in place so you’re actively working towards paying off your debt.

Consolidation loan –  This is a single type of loan which traditionally comes from a bank. It combines all your outstanding debt so you end up paying all of your creditors at the same time. Besides making payments easier, consolidation loans usually have a lower interest rate making debt repayment much faster. If approved, the bank will pay off all of your outstanding debts on your behalf, you then make payments just to them.

Related: Improve your financial literacy

Marketplace lending – Also known as peer-to-peer lending (P2PL), marketplace loans are a relatively new debt repayment option that is starting to become more popular. It’s basically a fixed-term consolidation loan that comes from accredited investors, who are anonymously and securely matched up with people who are looking to borrow through a P2PL company. With marketplace loans everything is done online so there’s no need to apply in person.

Unlike a traditional consolidation loan, marketplace loans encourage you to get out of debt. “Debt consolidation is a smart move if you can find a product with a lower rate and that will let you pay the debt off” says Andrew Graham, CEO at Borrowell. “We think our fixed-term loan product is a responsible way for someone to take control of their debt. A debt consolidation loan allows someone to pay off other debts and consolidate it all into one convenient monthly payment.”

Consumer proposal – This might not seem like a positive option, but it’s better than bankruptcy. A consumer proposal is a debt repayment plan made with your creditors with the help of a licensed trustee. With the proposal, you agree to pay a portion of what you owe to your credits and in return they forgive any outstanding debt once you’re done paying down the proposal.

“A consumer proposal is a great alternative to bankruptcy for many debtors” says Douglas Hoyes, a Trustee at Hoyes, Michalos & Associates.” You get the advantages of a bankruptcy without some of the disadvantages.” You don’t lose your assets and once the creditors agree to your proposal, your payment remains fixed even if your income changes. In some circumstances you might still be required to pay the entire portion of your debt, but a 0% could apply.

Beware of debt settlement companies and “debt consultants” that aren’t licensed. A federally licensed consumer proposal administrator does not charge up front fees, so if you’re ever asked for an upfront fee, the odds are you’re not dealing with a legit company.

Debt repayment options to avoid

Payday loans – These are the worst and should be avoided at all costs, yet a recent Joe Debtor study done by Hoyes, Michalos, & Associates shows that payday loans are way up! Some people who run into credit card debt believe that they have no choice and see payday loans as a real option. Payday lenders are smart with their marketing, I’ve seen ads that offer a “Free $200 cash advance” or “$3 to borrow $300”. It’s no surprise people think they’re getting a deal, but when you read the fine print you could end up paying 800% interest, which makes your debt much worse.

For an explanation of how interest rates are calculated on a payday loan, check out this video from Preet Banerjee.

Credit cards – You can’t technically pay off one credit card with another, but you can get a cash advance assuming you have available credit on the other card. The problem with this method is that you’ll end up paying a higher interest rate, and it starts compounding immediately– obviously you should never seriously consider this option.

Related: 6 Things we need to know about credit cards

Bankruptcy – This is literally your last resort. It’s time to consider bankruptcy when your debts are far beyond what you can repay on your own. Your debts will be totally cleared, but your credit will also be negatively affected and a note will be left on your credit file for many years.

It’s not just credit score that gets affected. “First, you must report your income to your trustee each month, and if your income increases, your payments while bankrupt may increase” says Hoyes. “Second, in a bankruptcy you lose certain assets.”

If bankruptcy is your only option, a licensed trustee will help you administer the process. Payments are based on your income and can last up to 21 months. There’s also a chance you’ll lose some of your assets, but at least once you’ve made your final payment, all your eligible unsecured debts will be discharged and you can start fresh.

Final word

If we’re not careful, our debt can get out of control, and as you’ve read, some debt repayment options actually do more harm than good. Taking control of our finances early is the best step since obviously we want to avoid bankruptcy or a consumer proposal, but if we leave our things unchecked we may not have a choice.

If you’re not sure how to handle your current situation, seek out a professional that can help you get back on track.