If you’ve found your way to this page, you’ve probably reached some conclusions about your debt exposure. For starters, you’ve decided that the growth of your debts is untenable. You know that you can’t continue to maintain your current financial trajectory for very long. You may realize that you’re just a few late payments away from insolvency.
Whatever the reasons for your current debt troubles, you recognize that you need to do something about them before things get any worse. Fortunately, you have plenty of debt-fighting options from which to choose. One of them might just save your finances from complete ruin.
Not all methods of debt relief are created equal. In fact, there exists a bewildering array of often contradictory debt relief programs and services out there. The information surrounding some of these services is sketchy at best.
The quality and accuracy of the information that you receive about various methods of debt relief is dependent upon its source. Some folks have a vested interest in telling you what you want to hear about a specific program of debt relief. Others simply tell you what they want you to believe.
You deserve some hard answers about getting out of debt. Read on to learn about the advantages and drawbacks of two of the most popular forms of debt relief: credit counseling and debt settlement.
Credit counseling is generally provided by nonprofit “credit counselors” that maintain close ties with many banks and credit card companies. Many of these organizations receive their funding directly from these lenders.
While some feel that this creates a conflict of interest for the credit counseling organizations, there’s little evidence that lenders use credit counseling agencies to manipulate their delinquent customers. In fact, these ties might actually help credit counselors negotiate favorable outcomes for their clients.
If you choose to sign on with a reputable credit counselor, you’ll need to be open to making some changes to your lifestyle. In exchange for analyzing your debts and crafting a manageable repayment plan, your credit counselor will want you to make deep cuts to your household budget. Of course, you should be cutting back on your spending anyway.
One of credit counseling’s major advantages is its flexibility. Unlike debt consolidation lenders, which rarely lend in tranches smaller than $10,000, credit counselors will accept customers who carry relatively small loads of debt. For clients who can’t afford balances of even a few thousand dollars, this openness can be lifesaving.
Your credit counselor’s primary function is to persuade your creditors to reduce the interest rates on your debts. In some cases, your creditors will be more than happy to do this. Unfortunately, many major lenders have a history of resisting such negotiations. If your credit counselor is unable to secure an interest-rate reduction on a particular credit facility, you’ll still be responsible for paying it off on its original timetable.
All of your reduced-rate debts will be included in your repayment plan. Instead of sending multiple checks to various lenders each month, you’ll need to hand over just one monthly payment to your credit counselor.
Unfortunately, this can stretch out your repayment window. Many credit counseling plans take as long as seven years to reach their natural conclusion. In the meantime, all of the repackaged debts continue to accrue interest. This longer repayment period may negate any savings negotiated by your counselor. Over time, your counselor is also liable to charge you hefty fees for its services.
In addition, the credit counseling process can be unforgiving. Even one missed monthly installment could nullify your entire repayment plan. Were this to occur, you’d be right back where you started.
Debt settlement may offer a cheaper and more efficient way out of debt. Unlike credit counselors, debt settlement providers work to lower the actual principal balances on your unsecured debts.
Since debt settlement negotiators are seasoned professionals that understand exactly how to pressure creditors to accept their offers, the process produces fast results. Depending upon the size and scope of your debt problem, debt settlement may put you on track to pay off your debts in just 24 to 48 months.
Unlike some other forms of debt relief, debt settlement is recognized as a favorable alternative to bankruptcy. While both processes will negatively impact your credit score, bankruptcy’s impact is likely to be more severe. You may have difficulty getting a low-interest loan for as long as seven to 10 years after filing for bankruptcy.
On the other hand, you’ll be able to begin rebuilding your credit as soon as you’ve paid off your debts using the debt settlement process. In fact, even most creditors prefer that their clients pursue debt settlement over personal bankruptcy. Credit card issuers and other purveyors of unsecured credit facilities rarely receive much compensation for debts discharged in bankruptcy.
Take the first step towards controlling your personal debt crisis. Call today to learn more about your debt settlement options.