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Debt Relief

Carl Andrews

Financial Advisor
Updated: 12/2017

It might not be surprising to hear, but debt is on the rise around the world, including the United States. In fact, according to Value Penguin, the U.S. Consumer Debt has reached over $3.9 trillion! Currently, over 38.1% of households have credit card debt, which can be equated to $10,308 in just credit card debt. The most unsettling part about these numbers is that they are sharply inclining.

Reason being, people have become accustomed to opening credit cards, using the entire balance, only paying the minimum balance, and, as a result, getting entrapped by the high interest rates. Now, match this with the rising costs of living, eliminating debt may feel more like a mirage than achievable. However, in the financial industry, there are many different tools that are available to consumers, just like you. These tools are known as debt relief.

In today’s article, we are going to explore the basic principles of debt relief, the advantages and disadvantages, and the four factors that you may employ to compare debt relief options. While this article serves more as an introduction to the topic, if you are looking to learn more specifics about debt relief programs, please click here! Let’s dive on in!

Understanding Debt Relief

Before we can jump in explore the deeper aspects of debt relief, we must begin with stage one: understanding debt relief. For beginners, debt relief is a terminology used in the financial industry to dictate an individual’s method or process towards eliminating debt. As the debt relief industry has expanded, more and more debt relief companies and programs have been developed and introduced to help consumers. Some of the most common debt relief programs available today is:

Debt Consolidation

Debt consolidation is the process of taking an individual’s debt and combining it under one loan. In other words, instead of several monthly bills, this form of debt relief seeks to organize debt under one monthly payment.

Debt Management

Debt management is much different than debt consolidation. Instead of merging any debt, this form of debt relief is where an individual seeks the professional help and guidance of a counseling company. From here, these individuals or companies will craft an individualized debt relief plan for the consumer based on their budget.

Debt Settlement

Another common form of debt relief that is available for consumers is known as debt settlement. This form of debt relief is when the individual seeks a third-party, or debt settlement company, to negotiate current debt with creditors. In the industry, debt settlement is known as the riskiest debt relief program.

Personalized Debt Relief

With the rise of the do-it-yourself movement in the world, another popular form of debt relief can be named the Personalized Debt Relief Plan. This is simply where, instead of consulting with professionals or debt relief companies, individuals craft their own plans designed to get themselves out of debt. The rise of this form of debt relief can be attributed to the rising negative connotation of other debt relief programs.

If none of these debt relief options seem viable to you, you may also seek a professional financial advisor who may be qualified to help in these situations. When an individual is seeking debt relief, typically what they are seeking is someone with excellent financial knowledge and expertise.

Now, it’s important to know that debt relief most certainly has its positive points. With that being said, in the next section, we are going to explore the different advantages and disadvantages of debt relief.

The Advantages of Debt Relief

With a deeper understanding of what debt relief actually is, we are now going to begin exploring the advantages of enrolling in debt relief. First and foremost, one of the most significant advantages of debt relief is the opportunity to reduce and even eliminate debt. All debt relief encompasses is different tactics and tools to reduce debt. Furthermore, by enrolling in debt relief, you will unlock access to professionals and experts in the industry who are trained to help you get out of debt. This is one of the principle reasons why individuals must take their time in choosing the best debt relief program and company – to ensure the highest quality service and experience.

The Disadvantages of Debt Relief

As with anything – wherever there are advantages, there must be disadvantages. With debt relief, there are some significant disadvantages that consumers must take into consideration. There is a reason why debt relief is known as one of the riskiest financial ventures – and here is why. Debt relief promises no results or guarantees. In other words, when an individual signs up for debt relief, there is no certainty that their debt will be eliminated, reduced, or adjusted. On top of this, debt relief may result in consumers breaking contracts with creditors, which may lead to lawsuits and other actions that can be credit-score debilitating. With that being said, it’s imperative to be aware of all the precautions before signing up for debt relief. The last disadvantage of debt relief is the significant increase of false advertisement in the industry. With that being said, as a consumer, it’s essential to be aware of debt relief laws and what’s legal and not legal. Through performing proper research and utilizing the four factors below, consumers should find well-respected debt relief companies.

The Four Factors to Better Compare Debt Relief Programs

In the debt relief industry, there are many different options and programs that are available to help consumers. From debt management, debt settlement, to even debt consolidation, there is a tool intently designed for each type of consumer. With that being said, to better help consumers out, we have created the Four Factors to Better Compare Debt Relief Programs. Utilizing these four factors, you should be able to highlight what debt relief program is best suited for your specific needs.

Credit Impacts

In the debt relief industry, it’s imperative that consumers take into consideration how debt relief will impact their credit score. The truth is, when an individual signs up for any form of debt-relief, unless it’s a DIY method, it will initially negatively impact one’s credit score. With that being said, the degree to which it impacts your credit score will be dependent upon the type of debt relief program you pick.

Interest Rates and Fees

One of the best ways that consumers can compare debt relief programs is through looking at the different interest rates and fees. Each debt relief program will have different interest rates and fees, depending on the type of program you enroll in. For example, debt consolidation companies may charge a lower interest rate than debt settlement companies because those who are typically accepted in debt consolidation have higher credit scores. In other cases, different debt relief companies may charge higher fees, such as upfront fees or balance fees.

Lifetime Costs

All debt relief programs function entirely differently. With that being said, it’s important to always take into consideration how the lifetime costs will change per debt relief option. The rule of thumb in this industry is that the longer the debt relief option, the larger the lifetime costs will be. This can be attributed to higher interest rates and extended payments.

Monthly Payments

Another area to always take into consideration when comparing debt relief programs is their monthly payments. Each option will offer differing monthly payments, all of which may be entirely dependent on your personal finances. We do wish to highlight that, when select any debt relief option, be sure to enroll in debt relief that does not cause any additional financial stress.

Tips to Accelerate Debt Relief

If you are in a financial hardship and struggling to figure out how to handle your finances or debt, there are a few tips that people can incorporate into their everyday life to begin accelerating the debt relief process. Whether you choose to enroll in a debt relief program or not, here are some of the best tips and tricks that financial experts around the world have shared:

  1. Reduce Spending – If you are serious about accelerating debt relief, you must quickly begin to change your typical financial habits. If you are quick to spend a dollar, you must first learn how to cherish a dollar. Start by reducing your typically daily, weekly, or monthly costs. The moment you enroll in any debt relief program, this is something that professionals in the field will suggest. Get ahead of the game by establishing new and better financial habits.
  2. Budget!- Typically, people that are interested in debt relief are those that lack or lacked a financial budget at some point in their life. With that being said, if you are looking to accelerate debt relief in your life, it all starts with a budget. In fact, if you are planning on enrolling in any debt relief program, without a budget, chances are, you will resort to normal tendencies, resulting in even more debt. A budget is the guidance factor that will help keep someone on the same page as the goal: eliminating debt.
  3. Boost Income – Did you know that there are more ways for people to make money today than ever before? The truth is, you can boost your income in so many different ways. There are many, many different websites where individuals can sign up and sell their expertise. You can even boost your income by asking your work for a raise or growth in your company. Learning more about how to boost your income is only one search engine search away!
  4. Selling Unused Stuff – When is the last time you looked through your old, unused stuff? If you find yourself holding onto useless stuff, instead of throwing it away, jump on Amazon or other websites to sell it! This is a great opportunity to make extra income to invest in paying off debt. You might be surprised at how effective this method is!
  5. Plan Ahead for Taxes – One of the biggest mistakes that consumers make is not planning ahead for tax season. Take the time to figure out how you can begin investing in yourself and handling taxes early on. This way you can minimize the impact of taxes. You can guarantee that, when you sign up for any debt relief program, they will inquire about your taxes as well!
  6. Save, Save, Save! – One of the main reasons why people end up enrolling in debt relief is because they did not save any money or prepare an emergency fund. With that being said, ironically, one of the best ways to accelerate debt relief is through beginning to save! Take the time to invest in yourself, even if it’s a little bit each paycheck.
  7. Can You Refinance? – While it’s not always optimal to make any significant financial decisions prior to enrolling in debt relief, one way to accelerate debt relief and minimal financial stresses could be through refinancing your mortgage, if possible. Now, this can be another risky decision and must be thoroughly researched before making any choices.

Eliminating Debt and Achieving Relief

Debt can present some significant stresses and hardships for consumers all around the world. With that being said, before you are quick to cave into the stresses or hardships, it’s important to understand there are many different tools and programs that are available to you. Depending on your needs, situation, and credit score, there are debt relief programs that are intently designed to help reduce debt and/or organize debt.

In light of this, if you are passionate about eliminating debt from your life, it will take an added level of effort and knowledge – this we cannot stress enough. Through learning more about debt relief and creating an effective budget, anyone can act and begin eliminating debt from their life. You can be certain that debt relief companies and experts will be quick to ask what your budget is and how you are currently handling debt. Perhaps its important to answer those questions before moving forward.