subject: Personal Finance Tips - How Legitimate Consumer Debt Relief Programs Work [print this page] Personal Finance Tips - How Legitimate Consumer Debt Relief Programs Work
People in immense amount of personal debt are looking for ways to come out of there financial troubles and hence, they are looking for some personal finance tips. There are a number of methods which can help the consumers to get out of their debt. These methods are bankruptcy, debt management, debt settlement and debt consolidation. Though bankruptcy is one of the traditional methods of debt relief, one should always try to avoid it unless there is no other hope. But till then, it is better to explore the alternatives.
Debt settlement and consolidation are the two major relief programs which work well for the consumers. Debt management on other hand is a kind do-it-yourself method where the consumers need to manage their debts and finances and then repay the debts in full. These question of legitimacy is reduced to two known methods of debt settlement and debt consolidation. Consumers need to remember that these programs will work only when they are legit. If not, the consumers will be fooled by fake and fraud companies and there will be no positive end result in terms of debt elimination.
A legit settlement program works well. It is capable of eliminating at least 50% of the dues that the debtors have. In a settlement program the negotiator from the settlement firm contacts the creditor on behalf of the consumer and intimates the creditor that the consumer will not be able to repay the debt in full. A formal letter is sent to the creditor and then when the creditor sells off the debt to a collection agency for recovery, the negotiator contacts the creditor and offers a repayment of 30-50% of the total dues in lump sum. The creditor also faces an implicit threat that the consumer will file for bankruptcy in the event of the creditor declining the offer. The creditor agrees to the deal and eliminates at least 50% of the whole due and then the consumer need to give the remaining amount of money to the creditor within the time given.
A legit consolidation program is a bit different. Here the debt is not eliminated. The consolidator from the consolidation firm hired by the consumer contacts the creditors and ask them to reduce the rate of interest and eliminate some of the fees and costs of debt such as late fee, over limit charges etc. Here also the threat of bankruptcy is used to force the creditors to agree to what the consumer wants. Once the creditors remove these charges and reduce the interest rates, the loans are re-amortized and new repayment schedules are made. The consumer then need to pay the consolidator every month who will then distribute the money among the creditors.
Debt settlement is a viable option to filing bankruptcy and is becoming increasingly popular amongst Americans with over $10k in unsecured debt. Creditors are ready to negotiate. You can literally eliminate 50% of your unsecured debt with a settlement.
