So you’ve realized that you are
overextended in credit card and miscellaneous
unsecured debt. If it hasn’t happened
yet, you know it’s just a matter of
time before you are not going to be able to
pay your bills on time. That realization can
be quite difficult to accept. Accepting this
realization is the most difficult part of
the process. Now that you’ve accepted
and are aware of your financial situation
it is time to focus on the solution. In order
to do so one must decide which process is
right for them.
Listed below are the options open to consumers
who are in need of debt solutions:
A: Debt settlement
In today's economy consumers are demanding the most effective
means to resolve outstanding debt. Debt Settlement offers
you an honorable solution to become debt free. In a debt settlement
program our company negotiates all of your unsecured debt
for pennies on the dollar. After terms have been negotiated
an affordable payment plan is structured to help you become
debt free in 16 -36 months.
B: Credit Counseling
With Credit Counseling you make a single monthly payment to
a credit counseling agency. That agency then distributes the
money to the creditors on your behalf, ideally at lower interest
rates. There are numerous problems with this approach and
in recent years Credit Counseling has come under heavy criticism
from impartial consumer groups and government regulators.
One of the most misleading aspects of Credit Counseling is
the "non-profit" status of most agencies. Just because
an organization says it is "non profit," there is
no guarantee that the services provided are free, affordable
or even legitimate.
The downside to credit counseling is as follows:
- In a Credit Counseling program you pay the full amount of debt owed and sometimes the interest rate is lowered only nominally or not at all on average 11%.
- Credit counselors don't always make timely payments resulting in late fees and a derogatory credit history.
- Not all Creditors agree to reduce your interest.
- Payments are still high and it typically takes 5 to 8 years to pay off the debt.
- In order to pay off your debt in full, credit counseling monthly payments are usually equal to or greater than the minimum payments you were making on your credit cards.
- Most Credit Counseling programs have a high failure rate. Their own industry estimates approximate a 21 - 26% completion rate.
- Many of these companies are funded by your creditors - the very people to whom you owe money - and thus, they must demonstrate some loyalty to the creditors.
- Despite claims otherwise, credit counseling may appear on your credit record. This is viewed negatively by most lenders and may hinder your ability to refinance a home or get a loan.
C: Debt Consolidation
Debt Consolidation involves taking out one loan to pay off
multiple debts. This is often done to secure a lower interest
rate, secure a fixed interest rate or for the convenience
of simply making one payment instead of many, although usually
for a much longer period of time. Consolidation can severely
affect the ability of the debtor to discharge debts in bankruptcy,
so the decision to consolidate must be weighed very carefully.
Because of the theoretical advantage that debt consolidation
offers a consumer that has high interest debt balances, companies
can take advantage of that benefit of refinancing to charge
very high fees in the debt consolidation loan. In addition,
some unscrupulous companies will knowingly wait until a client
has backed themselves into a corner and must refinance in
order to consolidate and pay off bills that they are behind
on the payments.
D: Bankruptcy
A bankruptcy will remain on your credit record for 7-10 years
and seriously affect your ability to rebuild your credit.
Even after a bankruptcy has been removed from your record
you are still required to disclose it on forms and applications,
even applications for employment. If you fail to answer this
question truthfully it can be considered a crime. This is
not a decision to be taken lightly.
E: Do Nothing
While doing nothing is an option, it is not a practical one.
However, a significant number of consumers do just that, which
only complicates your particular financial situation.
Please click on our debt calculator
to help understand the repayment expense
associated with each program.
