A Guide to Choosing the Right Debt Relief Option for You
If you’ve ever been impacted by credit card debt, the two words you probably dream of most are ‘debt free’. It’s a tough goal to reach, and there are a lot of ways to get there. Each path to becoming debt free has its’ own set of twists and turns. And, no single path is right for every person. When creating a relief plan, there are many items to consider before you choose what’s right for you. For example, how will this impact your credit? How delinquent are your debts? And how much can you afford in fees?
Considering these items before you start a path to financial freedom will help you feel empowered, restore your financial health and help you stay out of debt. If you’re struggling to make minimum payments on your debts, getting frequent calls from creditors or having trouble meeting basic needs, it’s time to think about a relief plan. Here’s what you need to about four different debt relief options, so you can determine which method is right for you.
Bankruptcy is a federal court procedure that can quickly eliminate debts through liquidation or asset seizure (Chapter 7 bankruptcy), or reorganization of debts (Chapter 13 bankruptcy). It can provide the chance for a clean slate and can give you relief from your creditors.
However, it comes at a cost (literally). Bankruptcy comes with costs of up to $3,000-4,000 in addition to filing fees. And, it can have a detrimental impact on your credit that can last for up to ten years. This can impact your ability to pass a credit check for a job or housing, and can negatively impact your ability to borrow money in the future.
Debt settlement is the process of negotiating with creditors to settle a debt for less than the full amount owed. Typically, this process involves working with a settlement agency or debt relief company who can negotiate on your behalf. Once a settlement amount has been agreed upon, you make monthly affordable drafts into a special purpose account. That money will then be used to pay your creditors. Then, the rest of your debt will be forgiven. A debt settlement program does take some time. A typical program last about 24-48 months.Unlike bankruptcy, your assets are not at risk of being seized.
Debt consolidation is the process of combining all your unsecured debts into one monthly payment. This is typically done with a debt consolidation loan, which is used to pay off high interest rate credit cards with a lower interest rate loan. Debt consolidation loans are usually given after you’ve completed a debt settlement program, so your total balance is lower. If debt settlement is not done first, you will still owe the same amount, but only make one monthly payment.
A consolidation loan can be advantageous if your new loan payment is less than your typical monthly creditor payments. You can get relief from your creditors and decrease the number of monthly payments you make. However, it’s important to always review your loan details before you sign anything. You’ll want to make sure the monthly payment is one you can afford—this means evaluating the loan’s annual percentage rate, principal and loan fees to ensure you’re getting a product that will help your debt situation rather than damage it.
At New Credit America, we have a unique debt consolidation loan called the DebtAway Loan. This product stands out because it will actually fund settlements with your creditors, reducing the amount you owe and helping to restore your financial health.
Another debt relief option is to undergo credit counseling or debt management. With this option, you make payments to a credit counseling agency who then distributes those payments to your creditors. Typically, you will pay the full amount you owe, but often with fees waived or the interest rate reduced. This option is for accounts that are delinquent, but not yet charged off. Credit counselors will work with your creditors to stop the extra fees you owe while paying off the debts. This usually requires your accounts to be closed.
Affordability can be a challenge to credit counseling. You will need to have the ability to make your payments to the agency each month, especially since you will be paying your full balance. If you struggle with cash flow issues, this may not be a good option. However, there are no additional fees associated with counseling. If you feel this is a good option for you, make sure you verify your agency before you make any payments.
Whatever option you choose, New Credit America is here to help you succeed. The restoration of your financial health is our top priority. To talk to expert about your debt relief options, give us a call at 1-877-373-2330.