If you’re struggling with debt, you’re not alone. Millions of people are in the same boat. Debt can be overwhelming and stressful, but options are available to help you get back on your feet. This article will discuss some of the best ways to find debt relief.
Types of Different Debt Relief
There are a few different types of debt relief available to you:
- Debt consolidation
- Debt settlement
- Debt management
- Bankruptcy
Each option has its own set of pros and cons, so it’s essential to understand what each entails before deciding.
Debt Consolidation
Debt consolidation is the process of combining all your debts into one large loan. A bank or financial institution usually issues debt consolidation loans. Still, you can also obtain them from online lenders specializing in personal loans and credit cards with high APRs (annual percentage rate). Debt consolidation companies typically advertise their services as “one low monthly payment,” making it seem very appealing.
Pros:
- Debt consolidation can help lower monthly payments.
- Debt consolidation also simplifies your financial life because all of your debts are rolled into one payment instead of having multiple bills.
- Debt consolidators usually offer some counseling services. It helps consumers understand how much they owe their creditors or lenders. Consequently, they know what needs to happen next to satisfy everyone involved!
Cons:
Debt consolidation loans typically have higher interest rates than other debt relief programs. It may not always be the best option if you’re looking to save money on interest payments over time.
Debt consolidation also doesn’t provide any immediate benefits. It merely eliminates one type of payment from your budget without replacing it with another (like bankruptcy does).
Debt Settlement:
Debt settlement is a process where you negotiate with your creditors to reduce the amount of debt that you owe
Pros:
- Debt settlement companies typically work on your behalf to get a lower payoff amount for the total debt owed. It can be beneficial because it allows you to pay off your debts for less than you originally owed.
- Debt settlements also have shorter repayment terms, so you can get out of debt faster than if you continued making payments on the entire balance.
Cons:
The main con associated with debt settlement is no guarantee that negotiations will be successful. Additionally, any forgiven or reduced debt will likely be considered taxable income by the IRS, and this could mean that you’ll owe taxes on any money owed by your creditors but not paid back.
Debt settlement companies typically require an upfront fee for their services. They also charge high-interest rates if they have to extend the repayment period beyond 12 months (which is usually unavoidable due to financial circumstances).
Debt Management:
The role of debt management plans is to help consumers get out of debt in just three years or less while paying off all balances at zero percent interest rate with no late fees!
Pros:
- Debt management plans can help you get out of debt faster than if you attempted to pay off your balances on your own.
- Debt management programs also offer a zero percent interest rate, which can save you much money over the life of your repayment term.
- It also includes counseling services, so you have someone to talk to who understands what you’re going through and can provide helpful advice moving forward.
- Finally, many creditors will stop reporting delinquent debts to credit bureaus. Once you include a debt management plan, it may help improve your credit score down the line!
Cons:
- Debtors need to understand that if they default on their payments, it could have negative consequences!
- Debt management companies may charge fees for their services. They do not guarantee that all creditors will agree to participate in the program.
- Having debts sent to collections after being unable to make payments for 90 days or more.
Bankruptcy
Debtors who enroll in a Debt Management Plan must do certain things. One close all of their credit cards, and two turn over possession of any collateral they had used as security on these accounts. Debtors must also agree not to apply or open new lines of credit during the life of their Debt Management Plan.
Pros:
If you declare bankruptcy, your creditors will stop collecting money from you since there is no longer any way for them to get paid back what’s owed (with some exceptions).
Debtors who qualify for Chapter 13 bankruptcy also have their monthly payments reduced over time. That is until they are more manageable, which means that you could potentially be debt-free within three years or less!
Cons:
For you to qualify for Bankruptcy, Debtors must first meet specific requirements. For example, Debtors must complete pre-bankruptcy counseling sessions with an approved agency before filing any paperwork.
They must also attend one additional mandatory credit counseling session after being discharged from bankruptcy proceedings (in addition to all other financial obligations)
To obtain certification from the court system as having completed these courses of action. Debtors should expect long wait times on top of expensive legal fees if pursuing this option because there can be delays at every stage of the process.
Debtors who declare bankruptcy will also have their credit scores drop dramatically. It makes it harder to get approved for loans or lines of credit in future years and may affect employment opportunities down the road as well!
Wrapping Up
Debt relief is a great way to get back on the right track after you’ve gotten off course. There are various ways to get debt relief, and we hope that this guide has given you a starting point on your journey.
Debt relief can help improve your financial situation and give you peace of mind. Remember to do your research, know your options and choose the best strategy for you.
If you want more information about debt and how to manage it, check out our blog or reach out today!
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