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Debt Relief Programs

Debt Relief Programs

 

Today debt has become a way of life for most Americans, however it cannot be denied that there’s a very thin line between good and bad debt. While you can use borrowed money to lay foundations of a better and brighter future, one irresponsible decision can put you into financial troubles  That’s where debt relief programs come in to help.Debt Relief Programs

It is worth noting that debt has been escalating at a hazardous pace among the young U.S. consumers putting the new generation at a financial risk. It usually starts with using the credit card irresponsibly and the situations gets worse in case of a sudden medical emergency, unemployment or any other unforeseen changes.

These people need solutions and here are 5 different debt relief programs to help them:

Credit Counseling:

This is one of the most common debt relief programs preferred by consumers. You can seek free credit counseling services to analyze your existing financial condition and find a solution for it. The counselors will provide a debt management plan to help you get out of financial troubles:

Pros:

  • The counseling services are usually free
  • The counselors will encourage you and teach you skills to reduce debt
  • They will work with you to create a workable budget plan

Cons:

  • Not all agencies are genuine or free, so beware of scams
  • It takes time to start showing results hence many people opt out of the programs quickly

Debt Management Plan

This is one of the most effective debt relief programs often recommended by credit counselors. It aims at eliminating your debt by slashing interest rates and fees. It lowers your monthly payment and you promise to pay off the entire debt over time.

Pros

  • This is more organized as you make just one monthly payment
  • It helps you improve your score
  • It helps you devise an affordable monthly budget plan

Cons:

  • It takes much longer (3-5 years) to clear your debts
  • You will need to pay a maintenance fee or monthly fee
  • If you leave the program, any concessions offered by your creditors will be nullified and you may even be charged a late fee.

Debt Settlement

In this program, the creditor may accept a much less amount than the total balance in return for a big payment made by the consumer. These kinds of debt relief programs are usually offered to people with very poor credit.  Debt settlement can save you a lot of money.

Pros:

  • You pay 50-60% less than actually debt amount
  • Hiring professionals can help your case as they are experts at negotiating

Cons:

  • This involves high risk
  • It might cost you high fees by debt settlement companies
  • Your credit score will be damaged for sure

Debt Consolidation

This is a type of debt relief programs wherein you take one loan to pay off other unsecured loans, so you have to make just one monthly payment with reduced rate of interest.

Pros:

  • There are several banks and credit unions where you can get this facility
  • The experienced debt-consolidation experts will help you with lower monthly payments

Cons:

  • Not everyone is eligible for this loan
  • Beware of the hidden fees

Bankruptcy

This is your last resort when the financial debts become so overwhelming that you can’t find a way out. Bankruptcy gives you the freedom to make a ‘fresh stat’ all over again however with certain restrictions that you will have to live with through a large part of your life.

Pros:

  • Allows you to make a new start

  • Protects you from mental harassment

Cons:

  • Credit score is badly damaged

  • The legal fees are high

  • All debts cannot be eliminated

 

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