Understanding the Efficiency of Debt Relief Options

Debt can serve as a financial tool for making purchases such as a house and other important things. However, debt can also become a burden to those who fail to pay the amount that they owe on the scheduled payment periods. It can also threaten and negatively affect the efforts of individuals to make ends meet as well as to fulfill their other financial obligations. Aside from this, debt burden also has a significant impact on the economy and public health of a particular country.

Statistics reveal that around 33% of individuals who are living in the United States have 10,000 dollars’ worth of credit card debt. Moreover, it is also revealed that Americans have a credit card debt amounting to more than 800 billion. There are individuals who have been indebted due to spending imprudently while other have been affected by unexpected circumstances such sudden change in a family situation, unemployment, and medical emergencies. Unfortunately, not all individuals have the financial means to pay off their debts and their corresponding interests. This is one of the main reasons why some individuals are seeking for debt relief.

Debt relief is defined as the reorganization of debt to lessen the financial burden of the concerned party by providing them with fully or partially measure of relief. It may be extended to heavily indebted individuals, companies, and even a sovereign country. This is also an excellent tool for reducing the inequality that exists between people from different levels in the society as well as between the poorest and richest countries.

Debt Relief: Examining its Benefits

It cannot be denied that debt relief provides numerous benefits. It is important that individuals recognize these benefits in order to think of better ways on how to make the most of these benefits.

Reduce Debt

The primary benefit that individuals can get from debt relief programs is the opportunity to reduce the amount that they owe to a particular lending institution. A credit counselor or debt settlement company can negotiate with the creditor not just to reduce the outstanding balance of their client but also to develop a debt repayment plan that has reduced fees and lower interest rates.

Rebuild Good Credit Score

Another reason why debt relief is a great idea is because it can help individuals rebuild their credit and increase their chances of having their loans approved.

Professional Support

Debt relief is not just about reducing debt. It is also involves the help of financial professionals such as a credit counselor in determining the right option that best suit the needs of individuals. The expertise, skills, and knowledge of these professionals about the financial industry ensure individuals that they will be able to choose the right option for them and deal with their debt problems efficiently.

Although debt relief is beneficial to highly indebted individuals or companies, there are situations wherein it may not work effectively. Individuals can incur additional fees if they fail to make credit card payments due to the assumption that it is already covered by the debt relief option that they choose. For this reason, it is crucial that individuals have an in-depth understanding about their financial responsibilities as well as the aspects that are covered by their chosen option. Moreover, it would be of great help if they do some research about the different debt relief options to identify which one can cater their needs.

Examining the Different Debt Relief Options

Several debt relief options are already available to help individuals reduce, if not remove, their debt in a logical, efficient, and consistent manner.

Debt Settlement for Debt Relief

This is considered as the cheapest way to reduce debt while avoiding bankruptcy.Debt settlement, which is also called debt reduction and debt resolution, is ideal for those who are looking for a better alternative than bankruptcy or consumer proposal. Companies that are offering this debt relief option have the capability to negotiate with creditors to decrease their client’s debt by 50% to 70%. It helps individuals get out of debt in 1 to 3 years.

Credit Counseling

Credit counseling is a systematic action plan that aims to lower monthly payments and interest rates. It is being recommended to those who find it hard to pay their monthly bills. A good company that is offering credit counseling services employ experienced, skilled, and certified credit counselors who are committed to helping clients create a practical budget and manage their debt.

Debt Consolidation

This debt relief option works by combining all the debts of individuals into a single debt with lower interest rate. This way, they will just have to make a single monthly payment. It is advisable that individuals stick to the loan offers of a reputable lender. This also promotes that payment of loans on time, giving individuals the chance to pay off their debt at a much faster pace.

Bankruptcy

By filing for Chapter 7 bankruptcy, the debt of individuals can be cancelled. However, due to the complex process involve in this debt relief options, experts advised that individuals should consider this as their last resort. This is probably because it requires expensive fees, creating a repayment plan, and liquidating assets. Individuals also need to have a constant contact with court officials and trustees who are reviewing the case. They may be asked to undergo a means test to assess their finances.

Debt Management Plan

Debt Management Plan (DMP) aims to lessen the monthly payments that individuals make by having a reprieve from penalties and interest rates from the creditor. Through this, individuals can also learn how to avoid bankruptcy and manage their credit well. DMP offers individuals the capability to improve their credit score, manage their debt well, and create and maintain a realistic monthly budget.

It would be best if individuals do more research about these options as well as the companies that are offering them in order to make sure that they choose the best option from a company that is dedicated to helping its clients improve their financial condition.