Weighing Your Debt Relief Options

By: kjmena

Millions of Americans struggle with debt every single day due to a number of factors like periods of unemployment, low wages and interest rates. This can make for a very stressful situation. However, have no fear as there are ways to relief yourself of your debt.

When figuring out a mode of addressing your debt it is important to recognize the type of debt relief services that are available. There are a number of ways to resolve your debt problems, each with its own advantages and disadvantages. However, you should always keep in mind that no one’s debt problems are the same and as a result aren’t always going to be resolved in the same form.

Minimum Payments

This is the most common and traditional form of relieving yourself of your debt. Sounds simple, right? It is. However, you have to know what your minimum payments are and be very committed to making the minimum payments each month. Even missing a couple of payments will cost you and have you in even more debt.

Making monthly payments will keep you in good standing with your creditors and slowly bring you closer to getting rid of your debt but it will take years to pay off. According to the Federal Reserve, the average American Household has $15,263 in credit card debt which could take up to a decade or more to pay off!

Not to mention this option has you paying off more in the long run because of interest. You could end up paying double or even triple of the original amount this way.

This is why a debt settlement or debt relief company is a more reasonable option in order to help you reach your desired goal of complete debt relief.

Debt Management

This is a form of credit counseling available to any struggling credit card holders. Debt management agencies will help you analyze your financial standing, determine how much you can pay and will negotiate with the creditors on your behalf. This process can result in longer terms or lower monthly amounts so that you can start affording the payments. Instead of paying the creditors directly, you pay the debt management agency and they allocate the funds accordingly.

This option gives you the possibility of lowered interest rates and monthly payments, waived penalty charge and other fees. Most importantly, creditors will course everything through the debt management agency instead of bothering you directly.

This form is usually the best option if you are having difficulty making your monthly payments and you only need moderate debt relief. This option can help but could also lead you to realize that you might be in a more serious financial hardship than you previously thought.

This is option is for receiving advice and management knowledge on how to handle your debt. This option doesn’t necessarily lead to debt relief but allows you to recognize a possible problem before you actually need expert help.

Debt Consolidation

Another option is consolidating your debt into one manageable account with a consolidation loan. This form of debt relief does not lower your total balance but manages all your debt into one single account. Consolidation’s purpose is to eliminate higher interest rate debts, arrive at lower monthly payments and have you concentrate on a single payment.

However, to qualify for this option you must have very good to excellent credit for a debt consolidation loan with a low interest rate.

You do not qualify for a debt consolidation loan if you have bad credit or have fallen behind on your bills.

You will need to contact a bank or credit union to assist you with a consolidation loan. The most common is a cash out re-finance loan, which is using equity in your home to pay off credit card debt.  

You do have to meet certain requirements for this option so it’s not available to everyone. Unfortunately, not all debt can be handled in the same way and thus you can always go for a different option.

Your best option might be a different debt relief program that meets your goals and gives you more room to take control of your debt relief journey.

Debt Settlement

An easier and more flexible option of debt relief. This is when a debt relief company negotiates with the creditors on your behalf. The debt relief company and the creditors will agree on a reduced balance that will be regarded as payment in full.

Basically, you go to an expert debt relief company for debt help. They talk to your creditors and once a reduced final payment is reached, you pay and you reach complete debt relief.

However, for this option of debt relief, once you enter into the program, you stop paying the bills to your creditors. Instead, you make similar monthly payments to a separate account (escrow) to pool in your resources. The monthly payment will be a pre-planned amount that you have agreed upon with the debt relief expert on your case. This account will then be used when a settlement is reached to make one single payment.

At first you might struggle with having to default on your monthly payments but this is part of the program. Do not worry or panic, as you will eventually reach settlement. If you stick with the program, the creditors will stop calling and sending you late notices as they will be paid once you complete the program.

Best Debt Relief Option for You?

This all depends on your specific circumstance, income, debt and financial hardship. You should first:

1. Calculate your debts
2. Talk to a debt relief consultant
3. Make a decision
4. Stick to the debt relief program
5. Reach complete debt relief