Debt Relief

Today, most of the families and individuals carry a huge amount of debt. There are a lot of reasons that might lead you to fall into debts. It might be due to you being unemployed, or there is a shrink in your income or your expenses are just mounting up.

It’s quite normal to experience financial ups and downs in life, but the problem arises when people just try to ignore the situation and hope that things would get better on their own. Sometimes, problems do settle on their own. However, when you are struggling with excessive debts, it’s not a good strategy to just let the things settle on their own.

Being in debt is an extremely stressful situation. When the amount you owe rises to such an extent that you are left with no hope to repay it, or when the state tax authorities are running after you for the repayment of debts, you may feel enormous debt pressure. Such a situation may result in sleepless nights, damaged relations and a lot of frustration. However, you can get a peace of mind with a debt relief program.

FAQ'S

What is debt relief?
Debt relief is a way to resolve your unsecured debts by negotiating with the creditors to reduce the amount of debts you owe. You can negotiate with the creditors on your own or you can use a debt relief program to deal with your debts.
Will debt relief affect my credit rating?
It entirely depends upon your credit report at the time of enrollment. A debt settlement or a debt negotiation program could negatively affect your credit rating. The negative information may remain on your credit report for up to seven years. However, by indulging in a good credit behavior, you could recover your credit score over time.
Should I include my credit cards in the debt relief program?
Unless you involve your high balance credit card accounts that are greater than $500, the debt relief program won’t work. It’s quite difficult to negotiate with creditors with open credit cards especially when you are settling on some accounts and not others.
How much does a debt relief program cost?
You don’t have to pay any fee, until your debts are negotiated. The debt fee will be processed, once you authorized the settlement. The fees related to the program are included in the monthly payments you make. These fees usually range from 15-25%.

Debt Relief Options

Thankfully, there a certain options to help you deal with the increasing level of debts and come out of the financial crisis.

Self Payment InitiativeDevise A PlanInform creditors about your situationConsumer Credit Counseling
It’s not necessary to approach debt settlement companies for your debt issues. It’s entirely in your own hands to repay your debts, without any third party. This option is worth giving a try. The best part is that, you don’t have to burden yourself with the unnecessary costs involved in hiring someone for helping you with the best solutions. You can just concentrate on paying off your debts in a proficient manner.
You need a plan to inquire the amount you owe and your ability to repay it. Also, you can get an idea of your current financial standings with the help of this plan. The easiest and the best way to begin this is by creating a spreadsheet. In case, spreadsheet in unavailable on your system, you can use the one associated with Google docs. It’s entirely free. You must create four columns into the spreadsheet. One for the creditor’s name, second one for the amount you owe, third one for the minimum payments (if any) and the fourth one payment under due date. You must fill up these columns with accurate information to get a clear picture of your current financial standing.
Next, you must give a call to your creditors and inform them about your current financial scenario. You need to have proper documents for proving that you are suffering from financial difficulties and it is impossible for you to make payment unless the creditors agree to grant some relief.
It’s important to show documents to prove that your claim is not baseless and you are truly in hard times.

If you happen to successfully convince your creditors about your situation, you can then have discussions with them about the possible ways for meeting your debt obligations. There are four popular options that you are likely to discuss with your creditors. The first one, having your present interest rate reduced. Say for example, if your present interest rate is 20% or higher, you could get it reduced to 18%. This would help you in lowering your monthly payments. The second option could be discussing the timeout period, of about three to four months. During this period, you will no longer be making payments. Instead, you can reorganize your finances and save a good amount of money for the payments. The third option could be converting your credit card debts into repayment programs.
The last option is debt settlement. This is where you agree to make lump sum payment to settle down your debts but for a lesser amount than you actually owe.

The second viable option to reduce your stress and pay off your debts is consumer credit counseling. There are a number of agencies providing consumer credit counseling. The counselors will discuss your financial situation. Depending on the severity of your financial situation, a counselor may recommend a debt management plan. A reputed counselor shall determine your ability to pay and accordingly negotiate with creditors on your behalf. Such negotiation might be for reduced monthly payments, longer payment time or reduction in interest rates.

If the creditors give a nod to the debt management plan, you would then deposit your monthly payments with the credit counseling organization. The credit counseling agency shall make payments to your creditors according terms of DMP. It nearly takes around five years to complete your DMP. Also, you will have to give away all the credit cards that are included in your plan. You cannot apply for an additional credit unless your plan is successfully completed.

The advantage of going ahead with DMP is that the creditors may reduce your interest rates and waive away certain penalty charges as well. Your monthly payments will most likely get reduced and you will no longer be chased by your creditors.

Debt Consolidation

Debt Settlement

Debt ConsolidationDebt SettlementBankruptcy
Debt consolidation is a debt relief option where multiple debts are combined into one monthly payment. Debt consolidation simplifies the repayment process and helps you to streamline your payments. You could consolidate your debts by taking low interest loans from different sources and use that money to pay off higher interest loans. If you are a homeowner or own equity in a house, you could get a home equity loan and you can use that amount to repay your debts. These are secured loans that require collateral. If you are not a homeowner or do not own equity in a house, you could get an unsecured loan. You will still be able to lower your monthly payments. Since, you don’t have to offer any collateral; your payments might not be reduced as much as with a home equity loan. The benefit of such types of loans is that your creditors cannot harass you anymore.
Debt settlement is an option where the debt relief companies negotiate with the creditors to reduce the amount you owe. The ultimate goal is to settle your debts for an amount lesser than what you actually owe. You can also negotiate with the creditors yourself. However, this might involve a lot of time and also there might be little chances of you to succeed. So, many people hire debt relief organizations to negotiate with the creditors. Once you have collected enough funds, they will be transferred to your debt settlement account. These funds will then be used for making payments to your creditors. Debt settlement may have an adverse effect on your credit score, but it’s still a better option as compared to bankruptcy.
Bankruptcy is a legal process for discharging your debts if you are unable to repay them. If you are left with no hope of paying your debts, you may file for bankruptcy. Bankruptcy is considered as a last resort due to its adverse affect on the credit history. Bankruptcy stays on your credit report for a period of 10 years. You won’t be able to get credit for at least two to three after your bankruptcy ends. Even if you succeed in getting one, you might be charged a very high interest rate. You can file for bankruptcy in two ways- The first one is the liquidation bankruptcy. This involves liquidating your assets to make payments to your creditors. The second type of bankruptcy is the reorganization bankruptcy. It involves reorganizing your finances so as to repay the creditors. Debt advice can help you find the right debt relief solution with a free, no obligation advice.