20 Debt Relief Methods – The Best Debt Relief Options For 2010
20 Debt Relief Methods The Best Debt Relief Options For 2010
The ads for debt relief are just about everywhere nowadays. With the economy still trying to get itself back on track, consumers are trying to do the same thing themselves. Debt relief is one of the ways that Americans are taking back control of their financial independence.
The concern as to whether or not debt relief works depends on the type of "relief" you're considering. Be assured that there are several options available to you, some more effective than others.
Debt Consolidation
Based on searches and results on Google's search engine, debt consolidation is one of the most prominent methods of debt relief. However it's probably one of the worst financial services available today. The appeal of making one monthly payment may seem attractive, but its effects on your credit profile are simply ruinous.
Though you may have negotiated lower monthly payments, you may end up paying more in the long run because the terms of payment have simply been extended. This causes you to pay more money in interest fees as you're taking out one high-interest loan to pay off all of your debts immediately.
Also, many debt consolidators in the market will suggest that you stop paying your bills so that it will be easier for them to negotiate payment of those accounts. While this may benefit you through lower payments, you'll absolutely trash your credit score in the process.
Credit Counseling
Since this is a service primarily funded by the credit card companies, credit counseling deals exclusively with credit card debt. Realistically only about a third of the people who inquire about credit counseling are actually eligible.
If you're dealing with any other forms of debt, medical debt, unpaid rent & utilities, personal loans, then credit counseling can't even help you. What's worse is that if you're considered "too far gone" for their very specific services, they may suggest bankruptcy as your only option.
Meaningful debt relief solutions should be able to adjust for consumer's specific situations, not the other way around. Credit counseling is only sensible if you have a minimal amount of just credit card debts and you're looking to pay them back immediately.
Debt Management
This tactic is almost identical to debt consolidation with one major exception; there's no loan that pays off all of your debts. Debt management still takes one monthly payment from you and distributes it to all of your creditors.
Everything that was negative for debt consolidation still applies here. This method may even be worse because at least with debt consolidation you're closing all of your derogatory accounts, whereas here they'll all remain negative until they're entirely paid off.
Debt Settlement
While it may require the most work on your part, debt settlement has to be considered the best of the bunch. With settlement, a company will negotiate lower payments for you, sometimes less than half of what you owed, but it's entirely up to you to make sure that your payments are made on time.
As with other forms of debt relief the fees for debt settlement can sometimes be outrageous. The industry standard is to charge you 15% - 20% of your total debt. Ideally you want to find a debt settlement company that's reputable and charges 5%.
The Right Choice for You
Obviously each form of debt relief has its own pitfalls. Deciding on the best option for you is critical to erasing your outstanding debts. Overall, steer clear of debt management and debt consolidation as the benefits don't outweigh the glaring negatives of those programs. Credit counseling is good if you're dealing with only credit card debt, and that debt is held to a minimum. Debt settlement is the most comprehensive of these financial services, but requires you to be on top of your own finances while you get yourself back on track.
Regardless of which one you may choose, it's important that you get a full understanding of the process from the company that you choose. Have them explain what their role will be and what's expected from you. Discuss time-frames and be sure to keep up with the payments. This may be your last chance before a bankruptcy is your only option. If you stick to it, you'll be glad that you did when you're debt free in a year or so.
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