Are you overwhelmed by your debt? There might be options that can work, specifically for you, to resolve this problem, including seeking debt relief. Although many individuals in bad debt run for debt relief to maintain their good borrowing history, you should know that it may or may not work for you. At this point, the best thing to do is look for professional help or educational resources to assist with understanding your options and the consequences of credit relief.
You may be behind schedule in making payments for your car, credit card, or mortgage loan. Losing all these assets could be a burden since you’ll become homeless and lose your entire investment. Also, traveling from one location to another could be inconvenient when lenders are looking to repossess your car.
To add to that, you won’t enjoy the benefits of having a credit card, including the freedom to purchase stuff you like. Read on to discover which credit relief option is suitable for you to help you prevent being blocked from getting loans in the future after failing to clear your loan payments on time.
Debt Relief Options
You should seek professional help from a certified credit counselor before deciding on which credit relief strategy to use. The professional should help you understand the main cause of your financial issues. These could include your bad spending habits or substandard financial management. Some credit relief options include:
1 Clear Your Monthly Balances
It’s the easiest and the least complicated option you can opt for. All it requires is your commitment to at least pay the minimum monthly subscription. However, if you want to take a shorter time to clear your debt, pay a higher amount than the minimum fee.
By paying on time, you’ll prevent high-interest rates and late payment penalties. Additionally, your credit score will remain in good standing if you keep paying on time. However, if that doesn’t work, you can consider debt settlement.
2 Debt Settlement
Debt settlement is a procedure where you seek help from a credit relief company to negotiate on your behalf with your creditor regarding a reduction in the outstanding loan amount you’re obliged to pay. If you pay the agreed-upon amount on time, the creditor may forgive the rest of your debt.
3 Debt Management
Debt management is another option you can pick while seeking credit relief. It entails enrolling in a credit-counseling program. Although it works the same as debt settlement, your debt management company consolidates all your loans and pays off your creditor on your behalf. The company can also negotiate with your creditor for a lower interest rate and monthly premiums.
4 Debt Consolidation
It’s a great option if you have multiple loans and pay separate monthly premiums. Debt consolidation is essentially bringing together all your debts into one loan. It will help you focus on making one payment. It, in turn, reduces the chances of forgetting to make monthly subscriptions, reduced interest rates, and eliminates high transaction costs.
5 Bankruptcy
Bankruptcy should be your last resort after trying out the above options, but all of them fail to work. It’s a situation whereby you receive a court ruling declaring you can’t afford to pay your loan.
6 Consequences of Debt Relief
Credit relief could involve wiping the debt out altogether in bankruptcy, getting changes in your interest rate or payment schedule to lower your payments, or persuading creditors to agree to accept less than the total amount owed. But debt-relief programs are not the right solution for everyone, and it’s essential to understand the consequences. Read on to know some of the cons of debt relief.
The debt settlement process can hurt your credit score. However, it requires you to divert the monies you’re currently using to pay creditors into a type of savings account to accrue enough cash to fund settlement agreements.
With debt consolidation, there’s no guarantee you will be out of the debt crisis, especially if you love spending beyond your means. It also entails upfront costs, including loan origination and balance transfer fees, and you may pay a higher rate for the consolidated loan. Bankruptcy can refrain you from getting any form of financial aid in the future, and you may lose all your possessions to pay off the creditors.
Bottom Line
After going through the above insights and understanding your options and the consequences of credit relief, it’s right to seek professional help to know what option fits your needs. For example, you can contact Freedom Debt Relief, and its experienced professionals will offer you personalized services.
