How Debt Relief Programs Work
Have you found yourself struggling to pay bills every month? Do you constantly receive phone calls from collection agencies harassing you? In today's economy, many people find have found themselves in this type of situation. There are a variety of options that can help, ranging from debt consolidation loans to declaring bankruptcy to debt relief programs.
Debt Consolidation Loans
If you own a house, it is possible to resolve your financial problems by applying for a new debt consolidation loan at a much lower rate. This type of loan is a secured loan, using the house as collateral. However, there may be high closing costs associated with this loan and if the monthly payments are not made, the home may be at risk. If you do not own a home, then it usually is difficult to obtain any type of loan, especially if you have fallen behind on your current debt obligations.
Declaring Bankruptcy
As a last resort, declaring bankruptcy may be an option. However, it may do more harm to your financial situation, negatively impacting your credit for the next ten years. Certain types of debt are excluded from the bankruptcy, such as child support and taxes.
Debt Relief Programs
Debt relief programs offer the best solution to the majority of people. Experienced, knowledgeable professionals work with you and your creditors to reach a settlement that everyone finds acceptable. Through this process, you may be able to reduce the overall amount owed and end up with a payment you can comfortably make every month.
How Debt Relief Programs Work
If you decide to pursue the path of debt relief, the first step is to meet with a debt relief professional to go over all your finances and see if this is the right option for you. Certain types of debts, such as unsecured credit cards and medical bills, can be included. Secured debt such as IRS taxes or a mortgage loan usually cannot be included.
The professional will help calculate what monthly payment you can afford based on your current income and other debt obligations. They may look at your current financial hardships and offer information and advice regarding budgeting, creating a plan to help you settle your debts.
The professional will work with your creditors on your behalf to negotiate and reduce the amount owed, possibly resulting in lowered interest rates or fee waivers. Offering to pay a lump sum settlement that is less than the total amount owed may be negotiated.
In order to pay the agreed upon lump sum payment, you may be required to set up a new bank account just for this. You would make monthly "payments" (deposits) to this account. These funds would be used to pay off the settlement amount over time.
Now that you have a better understanding of your available options, you may be ready to proceed towards fixing your current debt problems. The first step is to contact a debt relief program to see how they can help.