Five Debt Relief Options to Consider
1. Credit Counseling
Credit counseling is a comprehensive form of debt management that involves educating debtors, particularly credit card account holders, about the best ways to prevent and reduce their debts. Credit counselors belong to agencies and work as negotiators between debtors and creditors. They do not discourage people to avoid using credit cards, but they do advise people on how to avoid making late fees, going over their limits, etc.
Their goal is to develop repayment plans that are affordable, convenient and reasonable for both sides. Some agencies are free of charge while others charge high rates for their services. Debtors must consider if the time, money and effort put into the services are necessary to help them get out of debt.
2. Debt Settlement
Debt settlement is a method of reducing debt by settling on a lump sum payment. This payment is a reduced amount of the total debt. A third-party company receives and holds the payments until a settlement is made. A debt settlement is a fast, simplified way to get rid of debt, and many people find this method to be more suitable than bankruptcy.
3. Debt Consolidation
Debt consolidation is a type of refinancing that involves borrowing a consolidated loan to pay off one or more previous loans. It's recommended for people who have multiple debts that they find difficult to manage. The new debt balance is reduced with lower interest rates. Borrowers only have to worry about paying off one loan.
4. Debt Management
Debt management involves creating a manageable plan for debtors to pay off their debts. Debtors are given options to reduce their outstanding debts over the course of several weeks or months. A budget is set based on the borrower's current income and expenses, which is designed to make his or her monthly payments affordable. The benefits of management plans include reduced interest rates, extended repayment periods and reduced balances.
5. BankruptcyBankruptcy is the final solution for many debtors who cannot repay their debts. It's a method of relieving all of their debts, either voluntarily or by a court order. When you are granted bankruptcy, you receive immediate financial relief with all of your debts being erased overnight. When you start making repayments, your credit rating improves. Also, you avoid having your wages garnished or having liens placed on your property.
Every state has laws and regulations that affect how debts must be handled. Each state provides similar solutions for debtors who need easier ways to get out of debt. The effectiveness of each option varies with each unique individual or company. Contact a provider that has a wide range of debt relief options for you.