As long as credit cards exist, there will always be people with debt problems. But the good news is there are also lots of companies willing to help you keep your finances under control and reduce or eliminate your debt. Debt relief can come in many shapes or forms, and each has its own benefits and pitfalls. The challenge here is figuring out which solution is best used for your particular situation.
Some of the most effective ways of finding debt relief include:
1. Debt counseling
Debt counseling companies keep you on track by helping you come up with a plan for tackling your money and debt issues. A well-experienced debt counselor should be able to discuss the specifics of your financial situation and provide you with a personalized plan for managing your money and getting your debt under control.
You can expect a debt counselor to give you sound advice when it comes to developing a budget, which includes setting aside money to pay your debts with. When meeting your debt counselor, you must remain open to constructive changes to you spending habits. At the same time, you have to be fully committed to the idea of setting aside money for your monthly payments.
2. Debt settlement
Debt settlement refers to a method where you’ll pay a lump sum that will allow your entire debt to be forgiven. A debt settlement company will negotiate with your creditors with the aim of significantly bringing down the total amount of your debt. While the negotiations are taking place, you’ll need to set aside a particular amount of money each month as savings. This money will go to the lump sum payment once your creditors and the debt settlement company reach an agreement.
Before you enroll in any debt settlement program, be sure to do your homework. First, you have to find a reliable debt settlement company that can understand your specific financial situation. You can do that by getting recommendations from relatives and friends who have gone through the same ordeal. If you can’t get recommendations, you can also check for companies with accreditation and client testimonials.
3. Debt consolidation loan
As the name implies, debt consolidation refers to a loan that is used to pay off your debts. This method provides 2 benefits that may help you become debt free. First, all your creditors and agencies will be paid off and you will no longer be hounded by stressful calls from debt collectors. Second, there’s a good possibility that the monthly payment for this single, consolidated loan is less than the sum of the monthly payments on your previous debts. This may be a good solution for a student loan where you may need to combine two separate loans and making one payment is easier, but wont save you a significant amount. If you have mounting debt from a credit card then you should revisit debt settlement, which will decrease the overall amount you owe.
But there’s a catch: it may be difficult to secure a consolidated loan as banks may not be too eager to lend money to someone who is already struggling financially. It’s possible to consolidate your debts by getting a secured loan, but that can only be done if you are a home owner and have sufficient equity in your home. Otherwise, you will need to get an unsecured loan, which is a riskier option that may have higher interest rates.
While searching for debt relief options, be sure to watch out for programs that sound too good to be true. Some companies may promise everything and provide so-called guarantees just to get you on board, but they won’t explain the risks that come with the options they offer. Even worse, there are unscrupulous agencies that collect fees first before settling or reducing your debt. Instead of helping you become financially stable, these types of companies may make it more difficult for you to get out of debt.
To learn more about debt relief solutions and how to start living with financial freedom, contact CreditAssociates for a free consultation or use our Savings Calculator to see how much you could save.