THERE ARE 5 DIFFERENT WAYS TO ACHIEVE DEBT RELIEF
1. PAY IT DOWN YOURSELF
First and foremost, I want you to be aware that you can do this yourself but I can not guarantee you much success since you have proven to be incapable of handling your own finances. This could be worth a try and you won't have to add the burden of paying someone to help you out. You need to start off with a budget plan and a breakdown of your debt. That way you're aware of how much debt you have and your ability to pay them off. Also, it will provide you a visual of your current financial standing, which most find to be an eye opener.
The next step is to call your creditor and explain your situation.Be prepared to show proof of errors and claims. If they believe you, you can then discuss the possible options for you to meet your debt obligations and rid you of your financial burden.
This is the ideal scenario, unfortunately, the average American is unable to do this on their own because they lack the knowledge and simply do not know what to do!
Thus, let me examine your options and help with your financial woes.
2. DEBT MANAGEMENT
This is a program of credit counseling services for troubled credit card holders. These agencies have branched off to the private sector but at least you know that there are cheaper alternatives. 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. The negotiation can be on longer terms or lower monthly amounts Â whatever is necessary for you to afford payments. Instead of paying the creditors directly, you will be paying the debt management agency and they will distribute the funds accordingly.
The benefit of going for this type of debt relief option is the possibility of lowered interest rates and monthly payments, waived penalty charges and other fees. Most of all, you will no longer be harassed by your creditors as they will be coursing everything through the debt management agency.
3. DEBT CONSOLIDATION LOAN PROGRAMS
Loan consolidation can help you simplify the repayment process by transferring multiple debts into a single new loan. You may even qualify for lower rates or new terms, which could reduce your monthly payments. Debt consolidation seems appealing because there are a lower interest rate and lower payment. However, in almost every case we find that the lower payment exists not because the rate is lower but because the term is extended. If you stay in debt longer, you get a lower payment, but if you stay in debt longer, you pay the lender more. The debt is still there as are the habits that caused it - you just moved it and prolonged it.
You must have very good to excellent credit to qualify for a debt consolidation loan with a low-interest rate
You cannot qualify for a debt consolidation loan if you have bad credit or have fallen behind on your bills.
You can contact a bank or credit union to assist you with your debt consolidation loan needs.
4. DEBT SETTLEMENT
In a debt settlement program, a debt relief company negotiates with the creditors on your behalf. The goal is to allow them to agree to a settlement where you will pay for a portion of the debt (ideally this should be a sizable amount but not equal to the total balance) and the rest will be forgiven. The company does not negotiate lower interest rates and does not distribute a monthly payment to creditors. Under debt settlement, the client will make a monthly deposit into a special account.As the balance of the fund increases, the debt settlement service provider will reach out to creditors to negotiate settlements for less than what is owed. You'll need to come up to the pre-planned amount that you have agreed with the debt relief expert handling your case. In most cases, creditors agree to have the borrower pay for only a percentage of their original balance the rest will be forgiven. Your credit score will be negatively affected by a settlement. It is an alternative to bankruptcy so the effects on your credit will be similar temporarily.
Debt settlement is best suited for individuals who are struggling with very serious debt, those who cannot make required minimum payments and would otherwise be considering bankruptcy or credit counseling.
Last but not least, bankruptcy. This should be your last option after you've exhausted all other alternatives. Due to changes in bankruptcy laws, it is now much more difficult to qualify for Chapter 7 bankruptcy, in which the filer is cleared of any obligation to repay his/her unsecured debts. It's like starting over with your financial life but the consequences are huge. This will tarnish your credit history in a very bad way. You will be unable to get financial assistance in the future or will find it extremely difficult to do so.
There are two ways to file for bankruptcy Â Chapter 7 and Chapter 13. Before you can file on any one of them, you need to show proof of your income and other financial documents to prove if you are of the low, mid, or high-income class.
Although bankruptcy is often viewed as an option of last resort, it might be the right choice for some people.