Your Best Debt Relief Option May Surprise You

I know it can be confusing which debt elimination program or strategy to choose. This article illustrates the differences between the various alternatives. The best debt relief option available to you depends mostly on the amount of your debt you carry and if you have the funds to reduce the principal balance on your own. If you can afford to pay more than the minimum payment, then you may want to check out the best debt reduction tips. However, if you are making minimum payments, or are struggling to make your monthly obligations, then this article will give you the facts so that you may be able to make a sound decision to eliminate your debt. Please note that a couple of these options are obvious that they are not viable solutions. I only mention them because many debtors do not know the facts pertaining to these options. Here are the best debt relief options available to you: Save Big by ‘Doing it Yourself’ Debt Settlement This may be the best debt relief option at your disposal. You may save a few thousand dollars by doing it yourself. Then again, you may not. It depends primarily on how much knowledge and expertise you have about debt negotiation, and also your persuasive skills. Here’s what you need to know: 1. The debt collectors will do almost anything in their power to get as much money as possible from you as they can. After all, we’re usually talking about thousands of dollars. Many of them don’t even care about your legal rights when it comes to collecting a debt. They will lie, cheat and play mind games. You must know how to handle them. You must know your legal rights. You must be intimately familiar with the Fair Debt Collection Practices Act (FDCPA) & the Fair Credit Reporting Act (FCRA). 2. Every debt collector has a different collection policy. Hence, you must be familiar with the amounts and terms that the debt collector will accept. You are short-changing yourself if you don’t know how low each of your creditors will settle for. Only experience can help you with this one. 3. Be prepared to do tons of paperwork. Remember, the program takes about 3 years (on average) to complete. 4. A debt settlement usually has a network of attorneys that have experience dealing with your creditors. You need these attorneys because they will be much more likely than you to get the debt collector to drop the lawsuit. There is more to know, but the above covers the main points. What Will Happen If I Simply Stopped Paying My Debts? You would probably be spending more time than you care in court. If you are having financial problems, it’s very important that you communicate with them. I know it’s uncomfortable to talk to them. But you only have to do it once. There are laws that protect you from having to speak to them. If you don’t initially communicate with them, they will assume that you are refusing to repay your obligation. So the best strategy for them is to expedite the situation and file a lawsuit to scare you. If you continue to stop paying your unsecured debt, your credit will be shot for the next 7 years. What are the effects?  You will be harassed to a great extent by the debt collectors.  If you own property, the creditor may get a judgment and then place a lien.  You may not qualify for future loans. Many lenders require that all delinquent debt be paid before they fund the loan.  If you do qualify, the interest rates, down payment and the terms will be unfavorable.  If you plan to rent a house, the deposit will most likely be higher. In addition, you may be forced to live in a less prominent neighborhood than you wished.  You may be denied employment or a promotion. More employers than ever are looking at credit reports and judging your character in part based on what they see.Of all the debt relief options, ignoring your debts is the worse choice. Debt Management-Sleeping With the Enemy Until this day, I cannot understand why anyone would want to enroll in this program. It’s not that debt management doesn’t have benefits. It’s primarily due to the fact that the overall benefits aren’t all that great when you compare it to debt settlement. Let’s take a look at the pros and cons so that you can see what I’m talking about.The Benefits:  Negotiates with your creditors to reduce your interest rates. This is accomplished most of the time, but not always.  Requests that unpaid interest, fees and other penalties be waived. Sometimes this is successful.  Gives you tips and literature on financial planning. Excuse me, but wouldn’t it be much better to prioritize the situation and get tips and advice on how to get out of debt? The Detriments:  I believe that the main reason that debtors join a debt management program is because of the “non-profit” status that they boast. But non-profit is only a legal and an accounting term. It only means that their books must not show a profit. True, their fees are lower than debt settlement. However, what they don’t advertize is the fact that they receive “kick-backs” from the creditors. The higher they keep your interest rates, the larger the kick-back. This is what the credit card companies dub “fair share”. The first debt management company was established by the credit card companies. They know that there is, and always will be, a percentage of debtors that inevitably end up filing bankruptcy. So, in order to prolong the inevitable, they lowered the rates in order to keep these debtors out of the courts for as long as possible-they want that monthly payment to keep coming!  Debt management has about a 75% drop-out rate. Just this fact alone would make me run as fast as I could! Why so high? Because if you miss just one payment, you are booted from the plan. I don’t think this is fair considering the majority of the enrollees are already struggling.  Your credit will be negatively affected. When you enroll in a debt management program, every one of your accounts on your credit report reads like this: DEBTOR IS CURRENTLY ENROLLED IN C.C.C.S. PROGRAM. (C.C.C.S. is an acronym for Consumer Credit Counseling Service). Do you think this is a good or a bad thing? Some people argue that it’s a good thing. It shows that the debtor is making an effort to change his situation. They have a point. However, it doesn’t matter what the layman thinks… it only matters what the underwriter thinks. She will be the one to determine the probability of the debtor repaying a future loan. Just because the debtor is enrolled in a management program, the underwriter knows the statistics of the fall-out rate. They think like this: “what’s the difference between personal counseling and financial counseling? They both indicate that there’s a problem. Consequently, the loan is usually denied.  Last, the duration of debt management is up to 8 yrs, whereas debt settlement is usually completed in about 2-3 years. Why the difference? Because debt management only lowers the interest rate. Debt settlement, on the other hand, attacks the principal. It’s the drastic reduction of the loan balance that gets you out of debt fast. Debt management doesn’t accomplish this. Why should they? The longer they keep you in debt, the longer they keep getting kick-backs from your creditors. Debt management is a slow death… it may not be the best debt relief option.

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