Debt relief services, although mostly misunderstood, can serve as an effective way to get out of debt and find a path to a healthy financial situation. With many burdens on their shoulders, consumers are now facing even bigger problems, like ballooning credit card debt, medical bills, personal loan debt, and many other monthly payments. This can cause a lot of stress, and the current financial situation only benefits the banks and creditors since they want you to barely make a minimum payment every month. This is the case because you are most profitable to them this way. Even though you are making sure you don’t end up with a late payment, debt reduction may seem to be a distant goal because minimum payments typically only cover interest rate charges and do not chip away at the balances themselves.
If this is the case, you may consider looking into debt consolidation and debt settlement. These services are provided by various debt consolidation companies, but you have to be sure that you are picking the right one. Alternatively, you can choose to come up with your own debt management program, but you should know that in most cases, this won’t prove as an easy way out. There are far too many drawbacks, and your determination will be put to the test. That is why we want to take a closer look at debt relief services and help you make your own decision.
What are debt relief services?
Debt relief services usually include both debt consolidation and debt management. These two are often mentioned in the same context but there is a slight difference between them.
Debt consolidation is a means to pay off your debt by following a strict management plan that is loan based. This can be done by taking out a personal loan and paying off your other creditors with an end goal to have one monthly payment, instead of maintaining multiple expenses every month. You are replacing debt with debt, but hopefully with a lower interest rate.
Debt Management or a Debt Settlement company of your choice that tries to negotiate and lower monthly payments, along with a lower interest rate with your existing creditors. Coping with debt is made easier with a relief program that is drafted up by the company. You would also have access to a credit counselor that will guide you through the process and help you understand the end goal. These programs usually last anywhere between two to five years.
Who should apply for debt relief services?
Even though it may seem like an easy way to pay off debt, debt relief services can’t be used by just anyone. There are different types of debt that can and can’t be handled by such companies. Also, there are some drawbacks for people who want to maintain a perfect credit score. So what category do you have to fall into to be eligible for a debt relief program?
If complete debt elimination is your main goal, then you should probably consider contacting a credit counseling agency. If you have spent years paying your bills on time, but your total debt remains unchanged, a good debt relief program could be a lifesaver. Entrepreneurs who want to have an operating cash flow and can’t stand debt in any shape or form often leave debt negotiation to the professionals. It helps them focus on their business rather than spending time balancing multiple monthly payments with no clear way out. Lastly, if you don’t fall in any of these groups but still want to try to achieve a debt-free life, you are always welcome to request a counseling session that will help you understand how you can resolve your debt with minimal stress and effort.
On the other hand, if you want to keep a perfect credit score, debt relief services could be standing in your way. By enrolling in debt management programs, you affect your credit score slightly by taking a temporary hit. This can be an issue if you are planning on buying a house or applying for mortgage loans in the near future. You would also be unable to act as a guarantor for a family member or friend in case they want to acquire a loan.
How can you benefit from debt relief services?
With the obvious pros and cons out of the way, it is time to look at the benefits you could be receiving from a debt relief service. It is common knowledge that credit card companies prey on people with card debt as they are their main source of income. In some cases, interest can go up to 29.99%, and this can be a huge problem for your home budget. If you are like most Americans, you probably own a couple of different credit cards from different creditors or banks. Handling all those fees at once could be a huge factor that is preventing you from paying off your debts. This is where a good debt relief company could take a huge burden off your shoulders.
Rather than giving you a loan that would just repeat the cycle, the company will constantly keep negotiating with your creditors. Once an agreement is met, management plans will be put in place, and you will be free of your monthly debt collection. Your consolidation company will then proceed to combine all of your monthly payments into one single installment that usually has balances significantly reduced as a result of the negotiations.
On top of all that, you can receive valuable financial education from credit counseling experts. This will help you understand how debt settlement works and how disciplined you have to be to start with a clean slate. With precise debt settlement programs, you can save money while paying off your debt. This is why you have to be picky with your choices.
How to find the best debt relief services?
The best debt relief services are offered by the best debt relief companies, but finding them isn’t as easy as you may think. There are some key factors you should keep in mind when making your choice:
- How long have they been in business?
- Do they have a good track record and positive feedback from previous customers?
- Is the company accredited?
- Are they transparent with their fees?
- Do they offer free counseling?
These are just a few common questions you should be asking before making your final choice. When choosing between different debt relief options, you should always look at their age and experience. Dealing with finances requires a healthy dose of financial education and debt negotiation. If a company is new, maybe you should keep your options open and keep looking elsewhere.
A company that settles your debts should be accredited, and there is no question about it. With all of the regulations that are in place, companies are competing with their accreditations because they have clearly become an indicator of quality and trust. If you care about your financial wellbeing, you will look into their Better Business Bureau (BBB) rating and make sure they are accredited with the BBB. Other certifications include the IAPDA, and the AFCC, but you don’t really need to go too deep down that rabbit hole. A good reputation and a solid BBB rating along with accreditation are more than enough for starters.
Fees and hidden expenses are present in the industry, so you should be aware of them. Accredited companies tend to be transparent with and do not charge upfront fees, but it is also your responsibility to get familiar with them. During your counseling sessions, always ask about debt management plans and how the company is planning on dealing with debt. You don’t want to end up paying more for something that could cost you a lot less.
Lastly, free counseling needs to be mentioned because it is a feature almost every accredited debt relief company offers. This is very important because you need to establish communication and trust with your representatives. When consolidating your debt, you should be absolutely sure that the company is working in your best interests.
What are your options?
Apart from going straight to bankruptcy, there are four ways you can pay off debt with debt relief services. Not all of them will work for you, but based on your financial situation and your goals, there should be at least one that will prove useful in the long run.
Debt consolidation involves taking out a loan from a bank and paying off all credit card debt in one fell swoop. It can be done with a zero-interest balance transfer (if you are lucky) to a different credit card. You can also take out a personal consolidation loan with an interest rate that’s lower than that of your credit cards. Your total debt would stay virtually the same, but it will be paid off by one monthly installment, rather than many different smaller monthly amounts. In essence, you will still be replacing one debt with the same debt amount, ideally with a lower interest rate.
Debt management programs are something a debt relief company can offer you. During this process, they will negotiate your remaining debt with your creditors and try to lower your interest rates and monthly payments. This type of program takes a few years to complete, but if you follow the rules and instructions closely, you will be well on your way to a debt-free life. Debt settlement and debt management are often used terms that are used interchangeably.
Debt settlement is a longer process also offered by debt settlement companies. Instead of paying your creditors, you would reroute the money to a settlement company or agency that will distribute those funds once a settlement is reached. Once they have confirmed that there is enough funds to start negotiations, they will start making offers to pay anywhere between 10% and 75% to your creditors as a one-time payment or a multi payment plan. In some cases, it can take 2- 5 years to efficiently execute debt settlement. Remaining on the minimum payment cycle with your creditors often takes up to 30 years, so it’s fast by comparison. While it may result in halving your debt, it may involve some late fees and impact your credit temporarily.
DIY (do it yourself) is always on the table, but it is rarely successful. The term “debt snowballs” works both ways because it can either end in a disaster or it can refer to the simple method made famous by Dave Ramsey. The idea is to accumulate a $1000 emergency fund and then start paying off your debts from smallest to largest. Your interest rates don’t play a role in this approach.
It is worth noting that a DIY approach can be exhausting because it requires a lot of discipline and planning. You could spend days or months drafting a great debt consolidation plan, but sticking to it could be a huge problem if you aren’t determined enough. If you have a high volume of creditors, keeping track of agreements and payment for each one proves to be overwhelming for most people. Others just do not feel comfortable negotiating with banks, and may end up being taken advantage of due to lack of experience.
How to avoid scammers
When dealing with finances both online and offline, seeking professional help can become a literal minefield. There are many consolidation programs to choose from, but it is important to know that not all of them will help you with debt relief. Just like in any other industry, scammers are present in the debt relief business as well. Here are a few tips you can remember next time you go looking for a good and honest debt relief company:
Take initiative and constantly ask questions
Go through their website and look for anything out of the ordinary. During your first counseling session, you should ask as many questions as you can. Questioning their credibility is a must if you want to be sure you are making the right choice.
Check for the fine print and look for previous customer experiences. Once you have completed your on-site research, you should move on to review platforms and ask for opinions there. Good standing companies have a healthy online reputation as well, so it shouldn’t be overlooked.
Double-check offers that are too good to be true
Sometimes you may encounter offers that are just hard to believe. If someone tells you that they can solve all your debt problems in a year or two, you should start asking questions. Remember, it usually takes from two to five years to get out of debt, so anything below that time frame could be a red flag. Negotiations and planning take time, so there is a fair chance they could be skipping a step or two.
Don’t sign agreements if you aren’t confident in their honesty
Agreements can be tricky if you sign them without first familiarizing yourself with the document. Go through the proposed budget a few times and look for any red flags. Only when the company seems legitimate, and you are confident that you can make the monthly payments on time should you consider putting a signature on that paper.
In general, avoiding scammers won’t be easy, but if you pay close attention to the warning signs and ask the right questions, there should be no risk involved.
Can you consolidate debt with a bad credit score?
Unlike bank loans and credit card fees, this debt solution doesn’t require you to have a good credit score. Debt relief services help you bundle all of your monthly payments into one. As a matter of fact, a good debt relief service will aim to improve your credit score after the whole process is completed.
By memorizing and using all of the tips and tricks mentioned in this article, you should be well-equipped with financial knowledge that will help you make the right choice. It is important to remember that debt relief isn’t an easy task, and most Americans are dealing with this issue on a daily basis. Credit card loans are sucking up money from average consumers constantly, so there is no wonder we are seeing an increase in demand for debt relief services.
A small recap before we wrap it up
If you are struggling with your monthly bills and see no clear way of becoming debt-free, a financial consultation with a debt relief company can be very helpful. It isn’t just about determination. Debt relief requires serious negotiations and financial literacy that most people don’t possess. This is one of many reasons why more and more individuals are putting their trust into debt relief services, while redirecting their focus to more important things in life. Home loans and student loans can become a huge long-term problem if something unexpected happens to your financial situation.
There are many different ways to combat debt, but almost all of them are stressful and time-consuming. If you don’t have a fat savings account, it will be hard to change your habits and dedicate more money to your monthly bills and debt payments. This is where debt relief services can come in handy, and in many cases, change your life completely. Rather than struggling with your own debt relief plans, you can request free counseling and figure out if there is a solution that can help you get out of debt the easy way,
Trust should be a high priority because you only want to work with companies that hold consumer protection in high regard. You want them to be working in your best interests, so it is advisable that you establish trust first and talk about your debt management plan later.
Whatever your choice may be, the one thing you should always keep in mind is that debt relief can’t come overnight. It is a lengthy process that will require dedication, persistence, trust, and patience. Don’t take this subject lightly and always ask for help if you feel that you need it.