While some of us can responsibly deal with our debts, it is common to find a few people are drowning in unmanageable debt. There are individuals who found themselves in this situation due to spending imprudently. However, others are in unmanageable debt due to circumstances beyond their control. They include medical emergencies, unemployment, and other changes that were not predicted.
Monthly payments for credit cards, student loans, and mortgages can become burdens we are unable to cope with. Essentially, these debts are the reason why we live from paycheck to paycheck on a hand to mouth shoes string budget.
However, there are debt relief options that you can use to manage your debt and live a more organized lifestyle.
Debt relief services include:
- Debt settlement
- Debt consolidation
- Debt management plan
- Credit counseling
- Bankruptcy
The above services are costly and often involve plenty of paper work. The terminology used in these services is complicated and unfamiliar to our daily lives. That is why you need to leave debt relief settlement options to professionals.
Debt settlement
Debt settlement is also known as debt negotiation or resolution. It involves a settlement company bargaining with your creditors the lump-sum settlements that you owe them. The principle used in debt settlement is reduction of the principle you own and the eventual settlement of the debt. The advantage of using debt settlement companies is that they have experience and expertise dealing with your creditor. You are assured that you will not find any hidden surprises that you may miss out when trying to settle the debt on your own.
The disadvantages of using debt settlement countries are that it is hard to find the right company. Additionally, it is costly to use the services of debt relief companies.
Debt consolidation
Debt consolidation is taking another loan that you can use to consolidate and pay off all other debts. The scenario is similar to “borrowing from Peter to pay Paul”. Debt consolidation seeks to combine all debts into one manageable monthly payment that helps reduced interest rate on the debts when not combined.
Advantage of using debt consolidation companies is that they are trained to find you the lowest monthly payment that is available through expert negotiation skills with the lenders. They are also experienced and trustworthy when dealing with money lending financial institutions.
There are two disadvantages to dealing with debt consolidation services. Some of the more successful debt consolidation companies charge you highly for their services and require a certain percentage of the money that they help you save. Additionally, finding a dependable debt consolidation company takes time, and some research.
Debt management
Using a debt management program, you can handle credit card bills, student loans, medical bills, unsecured credit lines, and department store cards. Essentially, you are looking to reduce monthly payments by gaining reprieve from interest rates. Late fees or penalties from creditors can also be prevented by using a debt management program.
The advantage of a debt management program is that it is efficient and organized, improves your credit score, and helps create a realistic budget. The only disadvantage is the enrollment and maintenance fee.
Credit counseling
You can work with credit counseling agencies to review your budget and help evaluate your debt relief alternatives. The advantages of using credit counseling agencies is that; most of them are free, they use certified counselors who arm you with practical knowledge on debt management and budgeting. Additionally, credit counselors make use of more than a phone call to sort out any financial issues you may have. However, it is always important to do your research as not all credit counseling agencies hire certified counselors.
Bankruptcy
In case your debt situation is dire, then you can file for chapter 7 bankruptcy. This procedure cancels your debts. Chapter 13 bankruptcy helps you set up a long repayment plan. The main goal for bankruptcy is giving you a fresh start from debt burdens.
The advantages of using bankruptcy as a debt management option include
- Having professionals who understand the legal jargon
- Having protection from creditor harassment
- Having help with paperwork
The disadvantages include the attorney cost that you will incur. In addition, there are the legal fees that you have to cough up and the research you need to do in order to get the best attorney. Ensure you use referrals from friends, family members, and credit counselors you may know.
Author Bio
is a corporate tax attorney and credit counselor who specializes in helping people with their debt problems. In order to know more about debt relief and other services offered by Simon, you can find his articles on debt relief online.
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