Debt is the opposite of the financial freedom feeling because it is a burden both financially and emotionally. Debt management may have become difficult hence debt relief programs offer a way to write off the debts and bring order to your financial situation. The best thing that one must do is to look for the right program that suits the case that one is dealing with. Here are some of the leading types of debt relief to use as a guideline as you chase after your financial liberty.
Debt Management Plans
A debt management plan (DMP) which is provided by a credit counseling agency makes it possible for the client to have a specific payback period and in most cases lower interest rates. Here’s a quick rundown:
How They Work: There is a single monthly payment made straight to the credit counseling agency and they then distribute the payment to the creditors. Sometimes, the creditors may be willing to adjust the interest rate or perhaps overlook certain charges. Counselors are in a position to do this.
Ideal For: Those with a stable income who wish to consolidate payments and get a better interest rate with faster debt repayment. Most effective for unsecured loans such as credit cards because the interest keeps accumulating on the balance.
Cost: Counseling agency admin fees of $25- $50 monthly depending on the individual counseling sessions being offered. Potential savings offset costs.
Best Providers: GreenPath Financial Wellness has been in the business for a long time and has a good reputation with customers giving positive feedback. Money Management International has also been in the business for some time and has good ratings when it comes to customer satisfaction.
Debt Settlement
Debt settlement is where you can negotiate the payment with your creditors and collectors to receive a ‘settlement’ payment which is normally between 40-60% of your outstanding balance.
Here are the key points about these programs:
How It Works: When settlements are made, a separate account is kept where people who have made monthly payments are kept until enough money is saved to make another offer for settlement. Once an offer has been made and accepted and the amount has been tendered, the account is deemed to have been closed.
Ideal For: Large balance holders who once faced financial difficulty make the minimum payments unattainable. Undoubtedly, the best one among all the options for unsecured debt.
Costs: Average settlement fees for enrolled debts are anywhere between $1,000 and 25% of the enrolled debt over 24-48 months. Interest and other charges will keep on compounding until the borrower can pay off what they owe.
Best Providers: Looking at the experience, the number of years in operation, and overall reputation based on client feedback, Freedom Debt Relief and National Debt Relief are the best in this industry.
Consolidation Loans
Debt consolidation loans imply the payment of all balances by a new fixed-rate loan that comes with lower monthly installments spread over a longer period. Benefits include:
How It Works: Basically, some loans repay many other loans at once. New loans replace the old ones, in terms of the terms or payments that apply to the loans. Examples are home equity loans, personal loans, and balance transfer of credit cards.
Ideal For: Lowering higher credit card interest rates and converting payments into one easy and steady amount. Can be utilized in any form of debt.
Costs: Higher interest rates, origination fees, and the longer duration of the loan period imply that all in all, the total interest charges on the credit will be higher than with conventional bank loans.
Best Providers: Consolidation loans and balance transfer credit cards from credit unions have reasonable interest rates and registration fees. Banks, for instance, can also be an option.
Encouraging a person to seek help from a professional
And the best debt relief program is the one as individualistic as you are. Financial consultants, accredited and certified, as well as debt relief specialists, should assess your program without charge before you commit to it. The quality of any agency involved can be determined by the level of information disclosure on process, risks, costs, and rights. It is important to note that you do not have to continue suffering in the hands of your creditors and be overwhelmed by your debts, you can be provided with guidance as to how you can be relieved of your debts in a way that suits your lifestyle and other goals in life.
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