With consumer debt at an all time high it is safe to say that most people are looking for a way to ease this financial stress in their life. When a debt becomes too big for someone to handle just through budgeting alone they can seek out other options. Instead of bankruptcy a person can choose to go the route of debt relief. Debt relief is defined as a partial or total forgiveness of one’s debt.
Debt relief dates all the way back to biblical times but it’s never been more important than now. With credit card late fees climbing higher and mortgage interest rates on the rise people’s total debt continually increases. Many consumers find themselves burdened with heavy debt and very little hope in the way of relieving this debt on their own.
There are two popular debt relief strategies that you can implement before your debt gets too out of hand. They are the snowball method and avalanche method. With the snowball method you pay all minimum payments to all debt and then any additional funds go towards the debt with the lowest balance. This gives you immediate gratification once that debt is paid off and motivates you to keep going. The next approach is the avalanche method. This one is where you make additional payments to the debt that has the highest interest rate.
Credit card debt relief is a viable option for anyone facing mounting credit card debt. There are a few routes you can take with credit card debt relief. One option is to negotiate with the company to lower your interest rate. This way your debt doesn’t accumulate as quickly and your monthly payment isn’t going to be as high. Now with this option it will help to have a good repayment history and credit score. Another option is to do a balance transfer. If you try to negotiate a lower interest rate and the company won’t budge you can take that balance and transfer it to another card. With this option you would need a good credit score as well.
Some big banks like Wells Fargo offer solutions for people that hold a credit card through them. They realize that people sometimes do suffer from financial hardship and they want to work with you. So the sooner you contact them the better it will be and they can start you on one of the three options they provide.
The three options they offer are short-term and long-term payment options and then also debt counseling referrals. The short-term payment option offers a lower interest rate and possibly a lower minimum payment. The long-term payment option is for customers that require a long term concession. It has a reduced interest rate and a manageable monthly minimum payment. The last option is debt counseling, this is for customers that have multiple debts not just with their bank. They refer you to a qualified not for profit agency.
The last option in credit card debt relief is a debt consolidation loan. A debt consolidation loan is somewhat like a balance transfer for the fact that it allows you to move your high interest credit cards to a lower interest account. However, it is a loan and you may be able to get a better interest rate then you could on any credit card. These loans can be secured or unsecured and you would need good credit for this to be an option. Do keep in mind that obtaining a home equity loan should never be something that you consider. They are secured and you take the risk of being foreclosed on if you get behind in your payments.
If the negotiations don’t or won’t work in your case you can always choose to hire a debt relief agency. But please keep in mind not all debt relief agencies are created equal. You want to make sure they offer appropriate solutions, don’t cost you an arm and a leg, and that they are dependable. Debt relief companies can be a dime a dozen and some are here today and gone tomorrow.
A debt relief agency is defined as anyone who provides bankruptcy assistance to a person for compensation. This description came about because of the Bankruptcy Act of 2005. But not all debt relief agencies handle bankruptcy. There is no test you need to take to become a representative for one of these agencies. That is why it is imperative that you choose well during your search. Some have legal backgrounds and are well versed on the laws whereas some aren’t. So if bankruptcy is the route you are heading it is best to find an actual attorney that specializes in bankruptcy.
There are three types of debt relief options that debt relief agencies, not specializing in bankruptcy, offer. They are debt settlement, debt consolidation loans, and debt management programs. The first two options, debt settlement and debt consolidation loans, can hold significant risk. Steering clear of agencies that offer this is a good rule of thumb. They typically charge hefty fees for these options based on negotiations and administrative duties. Not all creditors will want to participate and these options will more than likely still cause significant damage to your credit rating.
When it comes to choosing a debt relief agency it is best to go with one that offers a debt management program. They tend to be the more reputable agencies. Debt management programs are set up for you make one consolidated payment to the agency each month and in turn they will pay your creditors. But keep in mind that this route definitely requires that you choose wisely. Check with the Better Business Bureau. Looking for a non for profit one is a safer way to go.