How To Compare Debit Elimination Programs

Debt elimination programs help to reduce your debt and improve your financial situation

. But the same risks or benefits are not offered by all programs. Depending on your situation, some programs will be better than others.

Debt Management Plans - Programs To Handle Accounts

Debt management plans (DMP) handle your unsecured loans. You make one monthly payment to the company, and they handle the rest. A debt management company also works with creditors to lower your rates, helping you to pay off most accounts in five years. Creditors have predetermined rates, so all debt management companies will get you the same reduced rate on your accounts.

Not all loan rates can be lowered, for instance car and student loans. For a year or more, it's possible for your credit to be frozen. However, as you establish regular payments and a lower debt to income ratio, you will soon qualify with conventional lenders.

Reduce Debt With Debt Negotiation Programs

Part of your debt can be reduced with the help of debt negotiation programs. For a fee, there are companies who boast that with their help, your accounts can be reduced from 10-50%. Your monthly payments will be lower with a lower principal balance, and you'll be able to pay off the rest of your account.

There will be a long term effect on your credit history due to a reduction of your loan balances. A lot of conventional lenders won't handle your application for at least 2 years even if you qualify for subprime lending. When it comes to income for tax purposes, you also need to report reduced debt.

Credit Counseling - Programs To Develop A Plan

A personalized financial plan is created by credit counseling programs. A certified counselor discusses your situation in a private meeting, either in person or over the phone. Things they might suggest are DMP, debt negotiation, and loan consolidation. With their help, you can also plan for retirement, purchasing home, or other future goals.

When you are comparing programs, be sure to compare the affect on your credit score, not just fees and tempting lower payments. You can save thousands in interest costs and future loans with the slower approach of a DMP. A better option in some cases is debt negotiation, especially if you want to avoid bankruptcy.

by: Adam Washington

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