Debt is a problem that plagues many Americans. According to the Federal Trade Commission, debt is the highest it has ever been. Consumers get so deep into debt that it becomes extremely difficult to get out of it. Before resorting to bankruptcy, which can end up being a detriment to credit, it is wise to seek debt relief.
There is no one-size-fits-all scenario for who needs and who doesn’t need debt relief. Most companies that offer some form of debt relief have a method of determining if and how they can help you. This kind of analysis consists of a review of your financial situation including your monthly income and bills.
Several kinds of debt relief are available to assist consumers who are overwhelmed with debt.
- Debt consolidation loans can be used combine your debts so that you can make a single monthly payment. Sometimes debt consolidation loans are secured on your home. In the event that you default on the loan, the lender can take ownership of your home.
- Consumer credit counseling helps consumers by developing a debt management plan that is approved by your creditors. This plan negotiates lower monthly payments and interest rates with creditors, making it easier for you to pay your debts.
- Debt settlement companies work with your creditors to lower your total debt by offering a settlement. The drawback of debt settlement is that it is not guaranteed to work. The settlement company advises you to stop paying your credit card bills and start sending them monthly payment. This payment is put into a savings account. After a few months, the company attempts to work out a settlement plan with your creditors, which may or may not be accepted.
Qualification for debt relief varies depending on the type of relief you are seeking and the company that you work with. Most debt relief companies require that the debt be unsecured. With the exception of debt settlement, all of your unsecured debt can be relieved. Since there is no guarantee that your creditors will accept the settlement offer, you cannot completely rely on debt settlement as a method of debt relief.
If you are working with a company find out as much information about that company as possible. Check with the Better Business Bureau. Use an internetsearch engine to find consumer reviews on the company. As with most things, if your gut is telling you something is wrong, it probably is.