Debt relief programs are instrumental in rescuing a person who has been bitten by the debt bug. There are many legitimate debt relief programs available that can bail you out of a debt trap. The choice of a debt relief program entirely depends on the specifics of an individual’s situation. Here is a closer look at some of the best debt relief programs available:
Credit counseling programs
There are many credit counseling agencies that offer finance counseling free of cost. The credit counseling agencies are professional bodies with financial experts who come to grips with an individual’s debt issues.
The credit counselors, involved with a counseling agency, get to the bottom of a debtor’s financial status. After scanning through a debtor’s possible sources of income, liabilities, loans and living expenditures, a counselor draws up a well-planned budget. The onus lies in directing maximum funds towards clearing debts. A debtor is required to follow the directives of the counselor and stick to the planned budget. A budget designed to meet specific needs of a debtor, coupled with finance management techniques, open up the doors to a debt-free life.
In case the debt bubble has grown to an extent that budgeting and finance management cannot save the situation, a credit counselor may suggest a debt management plan (DMP). The counseling agency sets up negotiations with your creditors and works out a feasible payment plan, which may include paying back at low interest rates or waiver on penalty charges etc. Sometimes, the creditors may agree not to report a pending credit in your credit report. They, however, cannot undo a negative credit that already appears on a credit report.
A final payback plan is worked out after negotiations with each of your creditors, and keeping your financial constraints in mind. You make payments to the credit counseling agency in accordance with this plan. The counseling agency then furthers the payment to individual creditors. Remember that debt management plans only cater to unsecured debts such as credit card debts, student loans, etc.
Consolidating debts is another effective debt relief program. The program aims at clearing your unsecured debts by signing up for a consolidated loan and using this loan to wipe away existing debts.
Debt consolidation loans are offered at minimal rates, often lower than the rates other loans are charged at. Debt consolidation is effective in clearing away multiple debts in lieu of a single consolidated loan. Catering to a solitary loan at a reasonably lower rate of interest is the biggest advantage of such a debt relief program.
Bear in mind that consolidation loans require collateral to be put up thereby transforming unsecured debts into secured ones.
Credit card debt consolidation
Credit card debt consolidation extends relief by allowing card users to transfer balances on different cards onto a single, new card. Most companies charge a very low rate (sometimes zero percent) for such transfers. Having balances onto a single card not only saves you from the niggle of having to pay for each credit card balance but also saves the interest that would have incurred on the unconsolidated balances.
It is important to do your homework before signing up for a credit card debt consolidation. Read the terms and conditions on offer and watch out for any unsaid/hidden fees, and crosscheck details such as introductory rates and their time periods, and the rates that apply once the introductory period is over.
The fact that balances are consolidated into one at minimal rates makes credit card debt consolidation a popular credit card debt relief program.
Debt settlement is a debt relief program more suited to cut down debts that have assumed alarming proportions. It is a viable option to pursue when debts have grown really big on you and it seems virtually impossible to pay regularly for these debts.
Debt settlement is carried out by settlement agencies. These agencies reach out to your creditors and initiate negotiations on your behalf to settle the debts by paying back an amount significantly lower than the one originally owed. You have the option of clearing away this negotiated amount at one go or through regular monthly installments. The flip side is that debt settlement has negatively affects your credit score.
With a wide range of debt relief programs to choose from, it’s up to the debtor to make a choice smart enough to suit his situation the best.