Debt Management Services
If you're reading this, chances are you're dealing with a sizable amount of debt, and are beginning to think about the options you have to help you start clearing it. You can take heart knowing you're not alone - the average American household owes around $18,000 in debt - and that number is only going up. The good news - many programs are in place to help you settle, consolidate, reduce and even eliminate your debt for good. Let's take a look at some of these debt relief services.
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Debt Settlement Services
Also known as debt negotiation, debt settlement involves you coming to an agreement with your creditors on a reduced balance, which you then agree to pay in full. If you've been keeping up with monthly minimums, most credit companies won't be willing to negotiate your balances down - it's when you stop making payments, and fees and interest begin piling up that debt settlement services become truly viable.
Debt settlement can be done on your own, through an attorney or a third-party company that specializes in debt settlement - however, it's important to be aware that debt settlement services can charge you a fee after successfully settling your debt, so make sure you understand what the charges could come to before deciding on this route.
Debt Consolidation Services
Typically, debt consolidation involves combining multiple debts into one, more manageable, and more structured payment plan made to a credit counseling agency. Through debt management, credit card companies may agree to reduce your interest rates, waive fees and penalties and allow you to make a single more affordable payment each month to cover all your unsecured debts. In contrast, with a debt consolidation loan, you are essentially taking out a lower interest rate loan in order to consolidate all of your higher interest rate unsecured debts. Two main advantages to debt consolidation, either through a loan or through debt management, it can secure lower interest rates and it can also provide you with the convenience of only having to make one monthly payment.
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There are two types of loans that you can acquire through debt consolidation services: secured and unsecured. Secured loans are usually for amounts over $10,000, and require you to put up substantial collateral (such as your home) to be approved. If you're a fiscally responsible individual and are confident you can make monthly payments on time, a secured loan is a great way to eliminate multiple, high-interest debts and make your life a lot easier. However, failure to make these payments can come at a severe cost - it's possible that the bank could repossess your home.
On the other hand, if you have less than $10,000 worth of credit card debt, an unsecured loan might be just the thing. Unsecured loans require no collateral to be put up, and interest rates on these loans are usually much lower than the high amount that credit card companies charge. Of course, it's still important to maintain your monthly payments; otherwise you risk further damage to your credit rating.
Okay, I want to explore my options. What's the next step?
Choosing to work with any kind of debt reduction service is a big decision, and like with all major decisions, it's important to do your homework. If you decide to work with a debt help service to help you lower your debt, investigate each choice thoroughly; put a call into the Better Business Bureau or your local consumer protection agency, and make sure your chosen company has a clean track record. Good luck - and may you quickly find yourself back on your financial feet!
Request a free debt relief analysis and savings estimate in minutes. Start by answering a few, simple questions here.