Many consumers may have found themselves falling deeper into debt with a handful of creditors over the last few years, and a growing number are looking for ways to find some debt management relief. Fortunately, there are a number of ways for consumers looking for debt management relief to approach the problem.
One common option is to have a consultation with a credit counselor, who will help put together a budget and a payment program for an individual to pay off the debt over a 4-7 year program. While this method won’t actually reduce the principal amount of the debt, it oftentimes reduces the interest rates and the payments that the consumer is making. If a consumer can afford to make the program payment, and keep disciplined throughout the program to make timely payment, this program will achieve results. However, while one is in a consumer credit counseling program, they will have difficulty applying for any new loans, as many lenders consider such a program similar to a bankruptcy filing.
Debt consolidation is another debt management relief option that consumers may seek. Consumers that are carrying several unsecured debt obligations with high interest rates can apply for a debt consolidation loan, in which a bank issues a new loan for enough money to pay off all their outstanding debt balances at once. However, consolidation loans can be difficult to qualify for because they often require a high credit score and sufficient income levels. For consumers that are approved, they can consolidate their debt into one single monthly payment at a lower interest rate. If consumers choose to pay more towards their principal balance every month than the minimum payment, they can get out of debt more quickly.
Debt settlement, also known as debt negotiation, is a debt management relief option that has become much more commonplace in recent years. Also known as debt negotiation, debt settlement is the process of negotiating with creditors to achieve a payoff amount that is a substantial reduction to the current balances that are owed. Creditors are very willing to negotiate on debt balances that are in arrears, because if a consumer were to file bankruptcy, they stand to get nothing. In order to succeed in such a program, consumers need to diligently save the funds that are required to make settlements, which typically run between 40 and 60 percent of the total current balances. Consumers can try to negotiate with their lenders on their own or they can hire the help of a professional Company. There are pros and cons to both – but a good debt settlement Company can achieve results for consumers that are more favorable than what they could otherwise arrange on their own.
Whatever method consumers consider, they should first make sure to research all their debt management relief options and also do their homework on the companies offering the various services. It is important to be confident and disciplined towards the debt management relief method that is chosen to ensure one’s peace of mind and financial health in the long term.