You may consider debt relief program to help you resolve your outstanding loans. The main reason why people opt for this type of program is to pay off all your debts faster. In some cases, you could be looking for lower payments because of tough financial times. Another reason you could consider finding a program is to escape the minimum payment trap where you are required to pay a minimum amount to cover for a loan. When you opt to go for a program, it is imperative that you carry out thorough research to understand what you are getting into. Prior to choosing an option, it is important that you understand all your options. Here are the common debt relief options that you can consider to determine the best option for you.
Making Minimum Payments
If you are making minimum payments on your current loan, then there is a high possibility that you are not accruing late fees and you will not be a subject to credit bureaus. You will be at the minimum limit and your lender has no obligation to report you to the lender. However, there is a complex phenomenon that occurs when the loans grow and become greater than the minimum payment due to high-interest rates. This is common for small loans because many lenders will attach high-interest rates to these loans to cushion any failure from borrowers to get the loan. In situations where the minimum payments do not change your situation, you can consider something different that will help you financially. Many lenders will prefer earning interest alone while the principle is untouched.
How Does Debt Relief Program Work?
Debt relief programs have been available for many years and they appear in one form or another. However, these programs have become more popular in the recent years because many Americans are falling into a serious debt crisis. Recent studies revealed that an average American household is $16000 in credit card debt exclusive or mortgage, medical bills and personal loans. Economic transformation has left people reeling in debts. It is important that you consider your credit and loans on your finances before you choose to find a lender to or a program to relieve you of the loan. There are a number of ways that you can use to achieve a debt-free life and the most common phenomenon include:
- credit counseling
- debt settlement
- balance transfer
- debt consolidation loans and the worst of all declaring bankruptcy
Each of the method listed above has the same goal and this is to provide debt relief. It is essential that you read through and understand how each method works before you choose it. Here is a detailed explanation of each method.
Debt Settlement Process
Debt settlement process begins when you request your lender or company to repay your loans on your behalf. When you have a sufficient amount of money in your escrow account, you can allow your lender to negotiate on settling the loans on your behalf. The working principle is by negotiating with your creditors to allow your lender pay off your credit at a lower face value. Not all creditors will agree to settle the loans for a lesser value but your lender will negotiate on your behalf to get a better value. It is better to settle part of the loan than default it. Debt settlement should be your last resort if you have outstanding loans.
How do I qualify?
As indicated, to qualify for debt relief program, you must be paying monthly payments to your settlement fund and this will be used to settle the loans with your creditors. For many borrowers, the monthly installments or payments on the credit card will be lower than total monthly payments and this can help you get the financial relief you need to clear your loans. If your creditors are harassing you and you have been paying monthly, the settlement then you should consider settling your credit. Another feature that your lender might look at is that you must be undergoing a tough financial challenge that you do not see any chance of coming through. This could be due to divorce, separation, reduction in hours, recent job loss or any adverse financial problem that caused a sudden reduction of income.
Debt Reduction and Relief
When you have multiple credit or loans on your name, it can be quite challenging to deal with if you do not have a solid plan. Handled responsibly, it could be an impetus for an upward change in your finances. Debt among many people is increasing and it puts people in a dangerous space where you are in a cycle of credit and any unforeseen circumstance can throw you off balance. Living beyond your means and financial emergencies are the reasons why many people fall into debt in most cases. If you are looking for a solution because of the financial crisis, then you should look for a lender who will give you credit card program, which would help you negotiate for lower rates and create a budget that will help you make sound financial decisions.
While you can be in a position to handle your debt solutions by yourself, there are some other services that you can have a professional help you deal with them. A credit counselor provides a clear picture of your financial alternatives and what you can do to overcome too much credit. Once your finances are analyzed, they will suggest a method that you can use to overcome debt. This service can be given by your lender or any other organization. They will teach you basic financial management skills and what you can do to improve your finances in future.
Debt Management Plan
This is the most common method of handling debt by creditors. The aim of this technique is to reduce fees and interest rates while providing a borrower with affordable monthly payments. Under this plan, you promise to pay back the full amount over time. You can efficiently manage loans from other lines of credit. This is a good plan if you want to improve your credit score while paying your debt.
Debt Consolidation Loans
This is an option that lenders in our network will help you in dealing with such debts. Your lender will combine all your existing loans and pay them off. Thereafter you will be required to pay lower interest monthly installments on one loan. Your lender has the expertise in the area and will guide you through the process. A reduction in debt means that you will have more money towards repayment of the loan.
Bankruptcy is the last ditch solution that you can opt to consider if your financial situation has become overwhelmingly difficult. It offers a new direction with a wide array of restrictions and you can choose to file either chapter 13 or chapter 7 bankruptcy. By filing bankruptcy, you are starting all over and you will have to work hard to restore your credit score. Experts in our network will evaluate your situation and inform you of the right and most effective way to take.