Credit card debt relief is a means of combining all your debts into one monthly payment that best suits your budget. Debt consolidation could possibly be done with a debt consolidation loan. This is where your debt relief company will pay off the total amount to your creditors and you are due to pay your debt relief company back until all debts are paid. You could also take out this task by using a bank’s home equity loan option to pay off your debts and eliminate the high-interest rates.
Common methods for debt relief consolidation
When it comes to home equity loans it can be tricky when you are trying to consolidate unsecured debt when it comes secured with your house. If the payments are more than you can afford your home can be taken back from the bank. It may be a huge advantage as much as a huge risk so be sure that you are able to make the requested payments and on time every month. If you lose your home that is one risk that you wouldn’t have if you continue to pay all your creditors separately.
When you hire a debt relief company, A loan isn’t the only option your company may use as a tactic to get you out of debt as quickly as possible. Your debts will remain separate, but your payment is consolidated by your consolidation company. You will send a payment once a month to the company and then they will divide your payment and send it to all the creditors you owe.
Your debt isn’t necessarily reduced while you consolidate
You need to remember, even when you get back to being able to climb out from under the debt of many credit card bills that arrive every month, that you still have the same amount of debt, but it is just being handled differently. Instead of paying on multiple accounts every month, you just pay one payment.
There are many companies that have great abilities to negotiate with your lenders to lower interest rates for you. These companies use their expertise to convince creditors that this option is the only option you are offering for repayment of your debts.
Better or Worse?
Debt relief is beneficial only when the debt that is consolidated has a lower interest rate, a lower monthly payment, or both. Your month debt payment will be easier to pay, but it is often achieved by making your repayment period just a little longer.
Scams are common. Don’t fall victim.
In the debt relief industry, there are many scams that consumers will fall victim to. Many have run a company for help and the company pushed them to get high-interest loans and in the end, it ends up costing the person in debt a lot more money in the long run. Some other companies may pocket the money you pay every month and never pay your creditors. This leaves you with horrible credit and in worse shape that you started. It is very important to pick the right consolidation company by reading reviews and making an appropriate choice on who will handle your debts ethically.
Many consumers will fall deeper into debt while using a consolidation company because they have freed up their many payments into one. This is an illusion that since there is extra money at the end of the month accruing just a little more debt will not be that bad of a downfall. When it comes to interest rates this couldn’t be further from the truth. This is a compounding problem with debt. When your credit is freed up to be sure to not go out and keep charging up your cards. You are putting yourself farther away from your goals to be debt free.
Alternatives to Debt Consolidation
There are other means of getting yourself out of debt. It just all relies on what option is right for you. Do you have a lot of extra money to throw at these debts and get them paid as quickly as possible? If you answered no, then you must find other options. The sooner you pay off your debts you save money in the long run with less interest in the whole process.
Plan to pay your own debts
This is the hardest option out of all options when it comes to ridding yourself of your financial woes. There are better ways to handle your debts to all your creditors but making minimum payments on all your credit cards will never get you out of debt. Throw a little more money at one card at a time until is paid off, even if you must make minimum payments on your other cards until your debt is completely gone. It will give you a feeling of a big achievement with each card you knock off your list.
Settle your debts
Settling your debt is a strategy of negotiation where you will pay off your creditors your outstanding debt by offering a fraction of the cost for your account to be satisfied. Settling your debts will lower your credit score for a while so if your goal is to fix your credit score as quickly as possible this may not be your best option. This option will charge for your cards or even your ones that are already in collections. This alternative you can do on your own or have the help of a debt relief company. The debt relief company will have the knowledge to help you if you have no clue on how to go about this tactic.
Use a consumer credit counseling service
Credit card debt relief agencies can negotiate better than if you try it on your own. They can have you pay a fraction of the total debt and usually the amount they get the settlement for is more than you would get if you call yourself. Debt settlement is a great alternative if you have many cards in collections and not so many that are open accounts.