Let's explore the many options and benefits of using a debt relief service. We'll not only tell you the pros, we'll also tell you the cons. We want to help you find the best path to conquer your debt once and for all.
A debt relief program is best described as a service that provides the expertise, infrastructure and the guidance you need to eliminate unsecured debts. Take note, not all unsecured debts qualify, but the majority do. Credit cards, private student loans, and unsecured bank loans are debts that typically qualify. Other, higher risk debts may qualify, it depends on the debt relief company.
If you don't find all the answers you're looking for here, feel free to explore some of our other posts.
In a nutshell, a debt help program helps by giving you relief from unsecured debts through a negotiation process. What most people don't know is how the process works and whether using a debt relief program is in their best interest. They may be weighing out this option against bankruptcy or a self help method such as a debt snowball or debt stacking. It's not always easy at first to decide which, of the many options, is the better option.
There is no perfect getting out of debt scenario, but with a little insight, it's easy to determine which path is best for you. Below, we will dissect debt relief as well its alternatives, their effects and their benefits.
Some of the debts that qualify for a debt relief program cannot be mixed. Private student loan, for instance, usually have to be brought in separately from other debt types. Credit cards and unsecured bank loans, however, can be brought in under the same program.
See a more detailed description for the different options at the links above.
In the right situations, the benefits of a debt relief program can be very beneficial. When you are not a candidate for bankruptcy yet cannot afford your minimum payments, a debt service can help insurmountably.
After a brief consultation, if you are not a good candidate for debt relief, most companies will steer you in the right direction.
This is where you have to weigh the plus side against the downside. You may ask yourself questions like "is the temporary credit impact worth getting out from under my debt sooner?" "Am I okay with paying a little extra on my taxes to save a lot more on interest and principle?"
No one wants to impact their credit negatively or give Uncle Sam more money, but it has to be weighed against what's the best option for you to get your debt knocked out.
$10,000 minimum in qualifying unsecured debts is the first requirement. Qualifying debts include, but not limited to, private student loans (i.e. Sallie Mae and most other private student loans), credit card debts, unsecured bank loans, repossessions and medical debts.
If you do not meet the minimum debt or qualifying debt type requirements, we are still happy to give you some advice that may help point you in the right direction.
One common trait all of our clients share is that they are all hard working individuals or couples that want to get back on track financially. Most got financially off track because of something like loss of job, loss of hours, major medical expense, divorce or any number of other unforeseen life events that came expected. Dealing with a situation like this doesn't mean you should throw your hands up and let yourself get covered up by a debt avalanche. It just means you're experiencing a bit of a financial rough patch. The quicker you get up and face it head on, the better.
One other qualifying requirement is that you need to be in the predicament that you are delinquent or faced with becoming delinquent or are already delinquent. You should also be able to afford to make about half the payment you were making. This is approximately what your payment through most debt relief services will amount to.
Lastly, keep a hopeful and positive attitude throughout your financial hardship. This will always help you have the best possible outcome. Worry doesn't solve financial woes, actions do.
Debt Relief vs Bankruptcy
Like debt relief, bankruptcy is designed to deal with debts you can't afford. Some of the debts bankruptcy and debt relief can deal with are the same. Some are different. For instance, you can include a home or car in a bankruptcy but not in a debt relief program. This is because debt relief programs only deal with unsecured debts. Something to note, though, is that even though debt relief services only deal with unsecured debts, they don't deal with every type of unsecured debt. This may make this type of a program sound more restrictive than bankruptcy but there are some advantages to choosing debt relief rather than bankruptcy. Thus arises a common question people experiencing financial difficulties ask themselves. Debt Relief or Bankruptcy? Which is right for me?
It may seem difficult at first to know which is the better option for you. Don't fret. There is enough contrast between the two that figuring out which is the better option won't be that hard once you know a little more about both. In short, stop worrying and start conquering your debt.
Getting a Consolidation Loan
Short of looking into a debt relief service one may looking into getting a consolidation loan. Debt consolidation loans can be a good option for those who have good to great credit. The problem here is that someone who is in need of debt relief doesn't usually have the credit score needed to get a consolidation loan. If they are able to secure a loan, it more than likely won't be at market rate. It will more than likely be at a rate way above the market average.
Just like with any other unsecured loan or line of credit, when a lender lends money to consolidate unsecured debts they are assuming all the risk. This is why credit score and credit history are so vital. If the borrower stops making payment and continues to be delinquent the lender doesn't have any tangible collateral to offset their loss. Not a risk most lenders are willing to take.
This is why people who are in need of debt relief not candidates for a traditional consolidation loan. If they were able to consolidate in this manner it would probably be at a less favorable interest rate than they are currently paying. Little things like credit score and debt type help funnel you in the right direction. By process of elimination you will begin to see more clearly which makes the most sense for you.