The Most Common Debt Relief Programs

Debt can injure your financial stability if you don’t handle or manage it on time. You can opt for debt relief whenever you find yourself in a vicious cycle of debt that you’re unable to escape. The most common debt relief programs can get you back on your feet within no time.

Debt relief refers to various strategies for making debt easier to handle. What debt relief looks like for you may hinge on the types of debts you have and what you need help with the most.

These are some of the most common solutions.

Debt Consolidation

This type of debt relief involves gathering all your unsecured debts and making a single monthly payment towards clearing them. You take out a consolidated loan from a bank, which then pays off your unsecured debt. Here, you’ll make a more affordable monthly payment to the bank.

The debt consolidation program requires you to have a good credit score of 670 and higher. While you’ll transfer the debt burden from one source to another, you may benefit from the lower interest rates and reduced monthly payments.

Debt Management

It refers to a carefully constructed debt payment program set up and managed by a non-profit credit counseling agency. A debt management program’s purpose is to clear credit card debt by reducing interest rates and creating affordable monthly payments towards the debts.

Your credit score won’t matter, as there’s no external loan involved. However, you have to be committed to the program and observe a high level of financial discipline. As a requirement, you must close your credit cards to avoid incurring additional debt as the program runs. And if you miss any payment, you may lose any concessions from your creditors.

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Debt Settlement

The debt settlement program takes a slightly different approach whereby a debt settlement company negotiates with your lenders to settle a debt for less than what you owe them. They often broker for the actual principal amount you owe to go downwards, and you may also end up paying a much lower interest on your debts. Furthermore, the debt interest rate accrues at a much slower pace

Debt settlement with a company like Freedom Debt Relief is a faster way of settling debts than debt management and debt consolidation. However, it’s important to keep in mind creditors aren’t obligated to settle, and some may refuse the deal altogether. Your credit score might take a bit of a hit as well. However, if you’re in a situation in which debt settlement is your best option, your credit score has likely already dropped. There could also be tax consequences, so make sure you research this option to be sure it’s your best approach.

Credit Counseling

Here comes a simple process that involves expert financial counselors from non-profit agencies. Credit counseling services are available free of charge. You may have to create a financial budget to help you pay your debts.

The debt relief program encompasses building a budget to see where you earn money, deduce how you spend it, and put up strategies for cutting back on where there’s excessive spending. The process requires a high level of financial discipline to achieve and stay out of debt once you clear your debts.

Bankruptcy

In some instances, the size of your debt may overwhelm your income. Your only option might be filing for bankruptcy. Bankruptcy allows you to stop your creditors from collecting money, and you may be free of some or all of your unsecured debts. However, this debt relief program leaves a negative mark on your credit report for almost a decade. That means you might not access credit any time soon.

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To Sum It Up

The debt relief option you choose may be advantageous or disadvantageous per your financial situation. It would be prudent to check in with the experts such as those at Freedom Debt Relief to learn about the most common debt relief programs and settle on the best one. Your road to financial freedom starts by calling the debt relief specialists.

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