You are deep in debt and it is not a good feeling. Like paying your monthly bills was not stressful enough, now you have to take worry about making monthly payments to your lenders.
Sometimes, being in debt is not a matter of choice but a matter of need. Still, you can’t go like that for the rest of your life and you will have to find a solution on how to cope with your debt.
You also need to reduce monthly payments which are taking a huge chunk out of your budget. That is what debt relief programs are for.
While the concept of a debt relief program might sound great, it is not always the best solution. Still, it may provide hope for people that can’t keep up with the monthly payments that they have been submitting until this point.
You shouldn’t expect that a debt relief program will solve all your problems for good – but, with the right type of debt relief program and some luck, you might be able to negotiate a better rate with your creditor and get back on your feet. But what is a debt relief program in the first place?
As we have mentioned above, going for a debt relief program can have a few outcomes. You will either erase your whole debt by claiming bankruptcy (which comes with a number of other consequences), or you will be able to negotiate better terms and fees with your current creditor.
Before talking about when you should go for a debt relief program, it is best to give you a clearer insight into four different debt relief types.
First, if you think that there is no way you can pay off your debt even once the creditor lowers your monthly payment or fees, the only way to get rid of your debit is to qualify for a bankruptcy debt relief program. By going bankrupt, your credit card, personal loans, and unsecured loans are all going to be erased.
There are certain consequences of going for such a program. You will still have to make owed tax or child support payments, and chances are your student loan will not be erased either.
Apart from that, once you file in for bankruptcy (Chapter 7), you will not have an option to go for the same debt relief program for the next 8 years, which means that if you get into debt once more, you will have to look for other solutions. Also, your credit score will be affected, and your bankruptcy claim could remain on your credit report for the next 10 years.
Debt management is one of the most common and effective methods to relieve your unsecured debt. Debt management is a program that covers unsecured credit card debts through waiving certain fees or lowering the interest rate. You make the payment to the credit counseling agency, and then the agency distributes the payments evenly between your creditors (their partners).
Unlike the bankruptcy program, debt management doesn’t affect your credit score, but the fact that your credit card accounts will be closed, might. Becoming a member of What Lies In Your Debt is a great way to get counseling and tips on how to negotiate and not miss out on monthly payments.
Going for a debt settlement should be seen as a last resort, as even bankruptcy might be a better option than it is.
The thing with a debt settlement plan is that the negotiation process can take a long time, and while your debt is settled, you still have to make the payments to a third-party company (debt settlement), while the creditor can charge you penalty fees, collection calls, as well as take legal action against you.
Last, you can try to negotiate a debt relief deal without hiring a third-party company to stand between you and the creditor.
Educate yourself on your options, and know how to negotiate a lower interest rate or waiving of fees. You can also apply for a 0% balance transfer credit card (if your credit score is good), and thus pay off a part of your debt.
While a debt relief program might seem like the only solution for your current debt situation, there are still things you need to consider before applying for one of the above mentioned options. We highly recommend the What Lies In Your Debt program as a great source of debt payoff strategies and tips.
First, you should know that not every debt can be erased through a relief program. As mentioned above, child support, taxes, as well as students loans can be negotiated and are going to be from a debt settlement or a bankruptcy plan. Unsecured loans or credit card loans are more likely to be negotiated or waived.
Along with that, you should know the fees and the costs of going through such a program. Attorney costs or upfront fees for debt settlement companies can pile up, and you should always read the fine print before agreeing to a personal loan settlement. You don’t want to end up paying more than you initially should have.
Debt relief programs do take some time, and you will not have free access to your credit card while the debt is erased or settled. That is why you should plan a long-term strategy on how to adapt your financial habits for the future, in order to stay out of further debt.
Last, you should know that debt relief programs do affect your credit score. While bankruptcy and debt settlement affect it in a negative way, by negotiating debt relief by yourself and paying the new fees and rates on time, your credit score will improve once you complete the program.
While being in debt is stressful, you should know that there is a way out. There are four different types of a debt relief programs, each with its pros and cons.
You should consult with your attorney before any further action, and decide on a debt relief plan by considering the type of debt you’re in as well as your overall financial situation.