When you’re looking for debt relief the main goal is to learn how to get out of debt. The first thing you should realize is there isn’t one option that’s “the best” for everyone. Each person has a unique situation and set of circumstances that will best determine what debt relief option is appropriate.
Debt Relief Is Not Easy
There is no simpler way to put it. When looking for debt relief options you should realize that none of them will be easy. They all require a bit of sacrifice, some discipline and most importantly, commitment. Contrary to what many people think, banks aren’t eager to hand out debt consolidation loans unless you’re going to put up your house for it and you have a lot of equity (Normally, 80% Loan-To-Value. If you owe $80,000 on your home, needs to be apprasied at least for $100,000). There’s a very high chance one of the debt relief programs can help you.
Just because debt relief isn’t easy doesn’t mean you can’t do it. Getting out of debt with the right plan is very doable. It all starts with evaluating what type of debt relief you need and your situation.
What Type Of Debt Relief Do You Need?
What type of debt is causing you the most hardship? Is it your mortgage? Unexpected Medical Bills? Credit Card Debt? For most people it’s a little bit of everything, but once they get help with one type of debt they can get back on their feet with the others.
Credit Card Debt Relief companies can assist you with credit card debt. The two main types of companies are Credit Counseling organizations which offer Debt Management Plans and Debt Settlement Companies that provide debt negotiation plans. These two options are vastly different so it’s important to know the difference.
A Credit Counseling Organization will place you into a repayment plan with your creditor at a lower interest rate. The payment plans normally don’t extend longer than 60 months (5 years) so the monthly payments tend to be rather high.
The main benefit is that since you are repaying the account at a lower interest rate more of your monthly payment is going towards the principal balance rather than the interest. If you already have low interest rates (10-15% range or lower) or are struggling to make minimum payments, this may not be the solution for you. However, if you have high interest rates and can comfortably afford your minimum payments, this may reduce the amount of time you’re in debt substantially.
A Debt Settlement Plan, on the other hand, will negotiate with the creditor to reduce the actual principal balance of the account to consider it “settled” and paid. It’s more aggressive than a creditor counseling plan, but will also offer more savings and likely lower monthly program payments. A debt settlement plan should be completed in a maximum of 36-48 months. However, the length of time to complete a plan with largely be based on the ability to make a larger monthly payment.
Mortgage Assistance is often needed if the loan was an adjustable rate mortgage and the rate recently changed causing the payments to be unaffordable. Also, the latest housing boom caused many home prices to rise to record highs. This caused many mortgages to be more than the average income earner can afford.
When getting help with a mortgage it’s important to ensure you working with a reputable firm. Never pay any fees up front so look for companies willing to help based on performance.