Debt Relief Options
When the bills keep piling up and your income stays stagnant, you may feel like you have no options. You may feel like you have no way out. But the truth is, you do. In fact, you have a couple different options for getting out of debt. Between bankruptcy, debt settlement, credit counseling and debt consolidation, you can choose between many different methods of debt relief. We are not going to lie to you and say they are easy, or that they don't have some cons along with their pros. We are going to tell you the facts about each of these debt relief options, so you can decide for yourself which one you would like to pursue. Because it is our belief that since it is your debt, it is your option to decide which method of debt relief to choose. Don't forget, though: we are always here to help.
As a 100% legal debt relief option, debt settlement entails a rigorous process of negotiating down debts with your creditors. You can perform debt settlement on your own, or you can get help from a professional debt settlement company. Both of these options have their pros and cons. If you take on debt settlement by yourself, you will most likely be inexperienced and therefore less effective. Debt settlement is also a very time-consuming and persistent process. On the other hand, if you get help from a debt settlement company, you will have to pay them a fee for their services, but you will most likely get better results with no time spent on your part. In simple terms, you will offer your creditors a lump sum payment of a fraction of your debt amount as a negotiation. For instance, if your debt amounts to $30,000, you can offer your creditors $10,000 in a lump sum payment, and they are likely to accept it. The key to this process is that you must stop paying your creditors and instead put affordable monthly payments into an secured FDIC account. Once the account has accumulated enough money, you may begin the negotiation process. In the end, you will end up paying a fraction of your debt in low monthly payments. This method is highly recommended by the Debt Help Network.
This method of debt relief is most often utilized by those who have difficulty making monthly payments due to high interest rates. This program entails being assigned to a credit counselor who will get your interest rate lowered so that you will be able to pay off your debts sooner and make smaller payments. You will offer receive financial advice, including budgeting plans and advice for staying out of debt and keeping a good credit score. Credit counseling typically only works for individuals who are not experiencing too much of a hardship, and are just looking for some moderate help in making their monthly payments. Credit counseling is available through non-profit organizations like universities, credit unions, military bases, and more.
When all other options are ruled out, then − and only then − should you consider bankruptcy. This is the absolute last option that you should consider when looking for debt relief. When you declare bankruptcy, you must surrender all of your assets to a trustee of bankruptcy in return for the removal of your debts. This "quick fix" to debt relief does, however, cause many negative effects that will last up to 10 years. For one, your credit will essentially be destroyed for many years after your bankruptcy, which will make qualifying for loans nearly impossible. Before jumping into Chapter 7 bankruptcy, which is considered a liquidation of your assets, first consider Chapter 13, which entails a restructuring of your debt loan. No matter what way you look at it, however, bankruptcy will be a detriment to your financial health and should only be considered as a last resort.
Another way to get out of debt is to pursue a debt consolidation loan. The process of debt consolidation entails taking out one loan in order to pay off many other loans with one affordable monthly payment. If you have several different debt amounts that you pay every month, including credit card debt, utility bills, hospital bills and more, then debt consolidation just may be the right option for you. Like debt settlement, debt consolidation can be completed on your own or with the help of a debt consolidation company. The benefits of utilizing a debt consolidation company are that they will work to lower your interest rates and monthly payments by allowing you to pay them instead of your creditors. This method of debt settlement is mostly used by those who have a moderate amount of debt and would simply benefit from lower interest rates and monthly payments.
Many people are under the false impression that paying the minimum on their debts is helping them pay them off. Well, unfortunately, this is most often not true. When you only pay the minimum, then your interest will keep accruing higher and higher, to the point that the minimum payment will only be enough to cover the interest. Thus, your principal debt amount will not get any smaller. So, the point is that paying the minimum is just as bad as paying nothing at all. To truly get relieved of your debt, it is essential to pursue one of the above options. Seeking help with your debt is not only a smart idea; it is necessary.