subject: Debt Relief Options In The Current Economy [print this page] Financial SicknessFinancial Sickness. In this economy, it's no secret that some consumers need a doctor for their debt. Excess credit card debt really is like a cancer that sucks life out of consumers. As minimum payments, interest, finance charges, late fees, and a host of other charges eat more of consumers' income up, there is less cash flow for everyday costs that really matter. Costs like food, rent, utilities, education, healthcare and more.
Symptoms. Without enough money to go around, many consumers suffer from unemployment, unpaid bills, sleeplessness, increased anxiety, and impaired relationships. Further, the damage to credit scores often impairs consumers' ability to apply for new loans, obtain new jobs, or even get approved for a simple apartment application or car rental.
A Host of Options: For consumers writhing with the discomfort of debt, there are relief options. Those who are in astronomical amounts of unsecured credit card debt should know that there are many avenues to choose from, and which ones are truly tailored to their needs.
* Debt Settlement. This approach is rather aggressive, and involves negotiating with a consumers' creditors in order to secure a settlement for a percentage of the original balance. These programs typically last from 12-36 months, and are a great tool when a reputable debt settlement company is involved. Consumers should know first and foremost that a legitimate debt settlement company will not charge upfront fees before services are rendered. Fees should only be collected after at least one of the consumer's accounts is settled. Ideal candidates have around $10,000 in unsecured debt and either struggle to make just the minimum payment or have already fallen behind on payments. Debt settlement clients typically notice a decrease in monthly payments normally made to creditors and an increase in cash flow. One New York Times article reports 2009 findings from the American Banker's Association that show settlements are becoming more common as creditors must do something with 'bad' debt. Thus, this option is worth looking into.
* Credit Counseling. Counseling works directly with a consumer's creditors to lower the amount of interest charged. Such programs are around 4-5 years long and save some money on the amount of interest owed. If this seems too good to be true, it most likely is. The majority of these companies are actually set up by the creditors themselves in attempts to recover as much of the debt as possible; the majority of their profits go straight back into the creditor's pockets. Further, a third party assistance (TPA) mark will show up on consumers' credit scores- these can be just as deadly as a bankruptcy! For consumers who may be considering this option, a better method would be to check out negotiatemyrate.com, a site that offers tips and success stories on negotiating lower interest rates with your creditors.
* Debt Consolidation. This option allows a consumer to take out one loan in order to pay off several other debts. Though these usually have a lower interest rate and offer one convenient monthly payment rather than several, they also usually take a longer time to pay off, making them more expensive. Another drawback is that if circumstances eventually force the debtor into bankruptcy, consolidation loans generally prevent certain debts from being dismissed.
* Bankruptcy. This is the final and most damaging option for debtors too deep in debt to climb out of the hole. Bankruptcy leaves a deep scar on a consumer's credit report that takes nearly a decade to repair.
A Cure. Though many debtors wish for a simple cure-all for their debt woes, this isn't realistic. A true cure for financial sickness begins with a careful look at the habits and circumstances that contributed to the indebtedness, and a willingness to improve both. From this foundation, a consumer is poised to make genuine financial progress with the help of a reputable debt relief option.
