Are you feeling overwhelmed with your bill or loan payments? Does it seem like you’re not making financial progress, no matter what you do? Does your unpaid debt equal more than half your income? If you answered yes to any of these questions, you’re not alone! In fact, there are millions of Americans just like you, struggling under the weight of overwhelming debt. The good news is, help is available through what’s known as “debt relief.” Read on to learn more about debt relief and decide whether this option is right for you.
What is debt relief?
When it comes to getting out of debt, there are some hard truths to learn—and there’s also plenty of misinformation out there. Debt relief is any activity taken to reorganize or refinance your debt to make it more manageable. Some debt-relief options also work to reduce the amount of debt owed, speeding up your path to financial freedom.
What types of debts does it cover?
Debt relief can be a good option for anyone overwhelmed by debts of any kind. Maybe you’ve had a recent change in employment—fewer hours, a lost job—or maybe you’ve seen an unexpected increase in expenses. There are a lot of reasons why people might choose to seek out debt relief. Before selecting a program, it’s important to figure out the types of debt you have and where a debt-relief provider can actually help. Some providers only cover unsecured debts (like credit cards and personal loans), while others will work with any type of debt. When consulting with a potential provider, be sure to ask about how they can help with your specific situation. We break down the types of debt below.
Some providers only work with unsecured debts, which are debts not backed by collateral (such as a home or an automobile). Examples of unsecured debts include:
- Credit card debts
- Medical bills
- Personal loans
- Student loans
- Utility bills
Other providers work with both unsecured and secured debts, meaning debts that are backed by collateral. Examples of secured debt include:
- Mortgage loans
- Auto loans
- Certain business loans
- Back taxes
Am I a good candidate for debt relief?
If you’ve sought out this blog post, it’s likely that you are a candidate for debt relief. However, to make things easier, we’ve come up with four signs that debt relief may be necessary. First, does a significant portion of your income go toward paying down your debt? Second, are you unable to afford the monthly minimums on your credit cards? Third, is the chance of securing a new loan out of reach for you? And fourth, is your savings account empty (or nearly empty)? If you answered yes to any one of the questions above, then there’s a strong chance you need debt relief. Next, we’ll jump into some of the different options for debt relief—and give you some pros and cons for each type.
What’s the best type of debt relief?
It depends on your situation. Here are some of the most common types of debt relief programs. When considering each of these, it’s important to weigh the pros and cons.
- Debt settlement: With this option, a trusted advocate, such as a debt-relief company, negotiates on your behalf directly with your creditors to lower the amount you’re required to pay them back. The upside is that this option allows you to pay off your debt quicker, and for a fraction of the outstanding balance—thus saving you both time and money. The downside is that creditors may not be willing to lower the amount of your debt or reduce it as much as you would like—though experienced debt-relief companies are experts at negotiating favorable settlements for their clients.
- Debt consolidation: The debt consolidation path involves restructuring multiple outstanding debts into one lump sum and securing a loan to cover that amount. So, instead of juggling multiple monthly payments to multiple creditors, you make only one payment to the lender from whom you secured the loan. This option has great organizational benefits, and your full outstanding balance will be paid over time. The drawback to debt consolidation is that these loans can be hard to qualify for if you don’t have good credit. Or, if you do qualify, the loan could be for an amount less than what you need to cover the entirety of your outstanding debt. Debt consolidation also doesn’t lower the amount of your total debt, unlike debt settlement. So if you don’t have great credit or can’t afford to pay back what you owe, this might not be the best option for you.
- Credit counseling: Credit counseling means a finance professional provides an evaluation of your debt and helps you to create a plan to pay it off. The pro here is that a good credit counselor will help you see the big picture. The con is that it’s only a first step toward tackling your debt, and you’ll still have to take action once the counseling is completed.
- Debt management: A debt management adviser can help you create a plan to pay off your debts. A debt management adviser can also negotiate with your lenders on your behalf for lower interest rates or different repayment terms. However, it’s important to note that these negotiations will not reduce the principal amount you’re required to pay back.
- Bankruptcy: The term “bankruptcy” definitely carries a stigma, but it’s not necessarily a fair one. For some debtors who’ve gotten in very deep, bankruptcy can seem like an attractive option to “erase” debt. With that said, bankruptcy should typically be saved as a last resort, as it can have negative effects on your credit for up to 10 years, and even longer in some cases. If you feel like you owe too much money and are struggling to pay off your debt, debt settlement could be a good place to start.
Looking to learn even more? Check out our post, “What are the Best Debt Relief Programs?”
How do I find the best debt relief provider?
If you’re in need of debt relief, the options can definitely seem overwhelming. It can be difficult to figure out which path will be the best for your lifestyle and budget. That’s why, at CreditAssociates, we offer free, no-risk debt evaluations. In a short and friendly, low-pressure conversation, we’ll help you determine which debt relief option is best for your unique situation. We love helping people get out of debt! Our certified debt consultants are here for you, ready to answer your questions, and provide personalized support. For your free consultation, call 1-800-983-6693 or fill out our online form to be contacted by someone from our team today