Debt management is never a one-size-fits-all strategy. When you seek debt management help, it is important that you find a debt relief program that is tailored to your needs. There are so many options out there. Some of these may be deceiving and might actually end up putting you in even more debt. So how can you find what works for you best? To help you out let’s look at some debt relief strategies. You can then determine which course of action would fit your problem the best.
This is one of the first options people tend to take when it comes to debt management. Without accurate debt advice, you can easily be misguided. So, let’s understand what debt consolidation really does. A debt consolidation plan combines multiple debts into a single loan. On the plus side, this makes it easier to pay down your debt, since you only have to worry about one payment. It may also be an advantage that the interest rate on the debt consolidation loan is likely lower than your other debts. However, unless you have a decent credit rating and a score you are not likely to get these good rates. You also run the risk of your creditors defaulting you for unpaid loans. Therefore, weighing all aspects to this strategy prior to deciding is crucial for good debt management.
An alternative to debt consolidation is a reputable debt management program. It is a form of debt consolidation, but it does not involve taking out another loan. You still have your debts combined into one monthly payment, which is typically lower than what you would pay otherwise. Instead of being administered through a bank or other lender, debt management plans are done through nonprofit credit counseling agencies. These agencies negotiate with the credit card companies to get you lower interest rates, and in many cases, other fees are also waived.
If you are not willing to commit to paging another loan, this might be the right choice for you. Credit counseling agencies such as ACCC couple these programs with financial education and budgeting help to give you a well-rounded picture of your situation. That can be a good foundation to build your finances again.
Yet another option when it comes to debt management is debt settlement. Although this is not a good debt relied strategy it is important that you understand the possible consequences you may face. Once you are aware of this information you can make an informed decision as to which strategy to follow.
At first, debt settlement may sound like a good debt relief program. In a debt settlement program, you don’t have to pay the full amount of debt that you owe. For example, if you have $10,000 in credit card debt, you may only have to pay $6,000. On the surface, it seems like you’re saving $4,000, and who wouldn’t want that? Unfortunately, these programs often come with high fees that cancel out any money you might think you’re saving. Additionally, any debt you settle on can be counted as income by the IRS, so you would have to pay taxes on that $4,000 you “saved.” This strategy is known for the possible damage it can do to your credit.
One of the biggest downsides of debt settlement is that it can significantly damage your credit. In this strategy, the debt settlement agency waits to pay your creditors until you are delinquent. This may result in your credit score plummeting making it even harder for you. due to the late payments. Also, debt settlement shows up on your credit report and stays there for seven years. This can be a red flag to potential lenders in the future because it tells them you might not pay back your debts.
Which debt management program will you choose?
Now that you know what options are available, which debt relief program will you choose? Before you decide on an avenue, make sure you assess your overall financial picture to see what option makes the most sense to you. Are you in a good enough position to take out a loan? What is your current credit rating?
This coupled with thorough research and education can help your credit debt relief journey. Look into every company from which you are considering seeking debt help. Make sure they are licensed to do business in your state and read reviews on their website and social media too.
If you are struggling to pay off debt, ACCC can help. Call 800-769-3571 today to speak to a certified credit counselor today.