Debt Relief Options – Take Action!
Today it’s quite common for families – and individuals – to carry $20,000, $30,000, even $50,000 or more of credit card or other unsecured debt. Most of us are optimistic by nature, and since it’s normal to experience financial ups and downs in life, many people just ignore the problem and hope things get better down the road.
Sometimes, problems do take care of themselves when we put our heads down and just keep working. Unfortunately, when you are buried under excessive personal debt, this is rarely the best strategy.
When you’re drowning in credit card debt or other unsecured debts, and you want to take a more proactive stance in becoming debt-free, there are a number of debt relief programs that can help to restore financial stability to your life.
Debt Relief Programs & Debt Reduction Options
Below are brief descriptions of various debt relief programs and debt reduction options available for those looking to lighten their financial load.
1. Continue making minimum monthly payments.
Although it is not a debt relief program in itself, making minimum monthly payments is one of the most commonly used methods of getting rid of debt. For many individuals, making minimum monthly payments can seem like a good idea because the short-term cost is low, but this can be deceiving as only paying the minimums can keep you in debt & paying interest for much longer than you would with other forms of debt relief. Compared to a typical debt relief program, paying the minimum monthly payments is often the worst strategy for repaying a debt.
2. Credit Counseling or Debt Management.
Credit counseling is a debt relief program that involves working with a credit counseling agency to organize your debt payment structure and attempt to lower interest rates in the process. Typically, a single monthly payment is made to the counseling agency, and in turn, they distribute the money to creditors on your behalf, ideally at lower interest rates so you can pay off the debt faster. With credit counseling, you still end up paying back 100% of your debt plus interest. On top of this, these programs are designed to take between 3 to 5 years to work through and have very low rates of completion when compared to other debt relief programs.
3. Debt Consolidation.
With debt consolidation, a larger loan paired with a low-interest rate is taken out and used to pay off your higher-interest unsecured loans. This type of debt relief program leaves you making a single monthly payment that is – in theory – lower than what you were paying for all of your credit card and other unsecured loans before. This can be a good debt relief option if you have debts spread over many different sources and have credit that allows you to secure a good rate of interest on the consolidation loan.
4. Debt Settlement or Debt Negotiation.
Debt settlement differs from the first two debt relief programs in that the actual principal balance you owe is negotiated downward by up to 60% in addition to lowering the interest rates. Because you end up owing significantly less total debt and interest is accruing at a much slower rate, debt settlement can generally a faster and less expensive debt relief option than either debt counseling or debt consolidation.
For the individual who cannot meet his or her debt obligations, filing for personal bankruptcy may be an inevitable outcome. A formal declaration of bankruptcy stops the creditor collection process, and the debtor no longer owes some or all of the unsecured debt, but their ability to borrow on credit is severely hindered for years to come.
Each of the five debt relief options has its advantages and disadvantages and may be the best, or only, option depending on your financial situation. Visit the individual pages to learn more about each debt reduction option or give us a call at 800-527-4421 and one of our debt relief specialists will be happy to help you.