For many people who carry onerous levels of high interest rate debt (often in the form of unsecured credit card debt), budgeting effectively during a crisis while continuing to climb out from under a pile of debt represent significantly difficult challenges.
Fortunately, there are debt relief programs that can aid in the process of restoring one’s financial health and getting on the road to a debt-free lifestyle. Coping with debt can be overwhelming, but a debt relief program can prove to be a silver lining. Read on to learn a number of reasons why a debt relief program could be the right option for you.
5 Reasons Debt Relief Programs are Worth It
1) Debt Relief Programs Help You Regain Control
The first step toward solving a debt problem is acknowledging its existence – gaining a full understanding of the problem and putting principles in place toward solving it. Free credit counseling is available through non-profit debt help companies certified by the National Foundation for Credit Counseling (NFCC), who certify credit counselors at over fifty debt help companies.
Every NFCC certified credit counselor completes a comprehensive training program that ensures the counselor is fully qualified to assist consumers who require guidance with debt relief. Additionally, many businesses within the debt relief industry offer free credit counseling services and free educational materials that can further get you on track financially. After evaluating your situation, a counselor can recommend various debt relief options that suit your specific financial situation.
2) Debt Relief Programs Can Lower Interest Rates and Monthly Debt Payments
Two forms of debt relief that can result in lower interest rates and monthly payments are the debt management plan (DMP) and the debt consolidation loan (DCL). A DMP is a structured debt relief program managed by a debt relief company that works on your behalf to negotiate lower interest rates and lower monthly payments with creditors.
Instead of needing to keep track of and make multiple monthly payments to a variety of different creditors, a DMP allows you to make one streamlined payment to the debt help company, who then submits appropriate disbursements to creditors according to the terms of the debt management plan.
A DCL consolidates multiple debts into one single loan, typically resulting in a lower overall blended interest rate and monthly payment. Funds from a DCL are immediately used to pay existing balances on a number of pre-existing debts. The DCL provides the dual benefit of streamlining the repayment process while simultaneously lowering interest expense and the total amount owed over time.
3) Debt Relief Programs Can Reduce the Total Amount of Debt
When lower interest rates are achieved through a DMP or DCL, this reduces total interest expense over the life of the debt, reducing the total amount owed. Additionally, and separately, pursuing the debt relief program of debt settlement can lead to a successful negotiation of a payoff amount for less than the total balance owed on a debt.
Debt settlement companies, also known as debt relief companies, can help reduce the amount of debt that an individual owes by negotiating directly with creditors. The process of debt settlement focuses primarily on unsecured debt, such as credit card debt, and creditors become more likely to settle when a debtor has already demonstrated an inability to pay.
Therefore, once an individual has fallen behind on payments by four or five months, it can be the ideal time to engage the services of a debt settlement company. The IRS does require that debt settlements achieved in excess of $600 be reported as taxable income.
4) Debt Relief Programs Can Help You Get Out of Debt Faster
Many people who are burdened with high levels of debt can only afford to make minimum monthly payments, compounding overall interest expense and stretching out the life of the debt by many, many years. Contrast that to a debt management plan, which is designed to help the individual achieve a debt-free lifestyle within three to five years – or a debt consolidation loan, which immediately pays off pre-existing higher-interest rate debt and lowers overall interest expense.
Debt Settlement, meantime, can often result in a negotiated settlement for less than the total amount owed. All three of these debt relief programs are designed to help individuals get out of debt faster, and along with proper counseling and education, can lead to greater awareness and discipline in budgeting and future spending habits.
5) Debt Relief Programs Can End Collection Agency Phone Calls
Debt collection agencies pursue unpaid debts on behalf of creditors while utilizing a variety of tactics that include persistent phone calls, menacing letters, and the possibility of lawsuits that can result in wage garnishment or asset seizures. Given the inherent stress and unpleasantness involved, there are few experiences less appealing than having to deal with debt collectors.
The good news is that debt relief programs such as a debt management plan or a debt settlement negotiated by a debt relief company that communicates directly with creditors, will lead to a structured repayment plan that puts an end to collection agency calls. With a debt consolidation loan, pre-existing outstanding balances are immediately paid off by the funds generated through the DCL. Therefore, with all three debt relief programs, debt collectors no longer have reason to keep calling.
How Do Debt Relief Programs Work?
If you would like to know how debt relief programs work, contact us here at United Settlement. In an initial 30-45 minute phone interview session, one of our experienced debt counselors will ask questions related to your income, expenses and debts, and discuss debt relief programs specifically applicable to your situation. Among the more common solutions available is the Debt Management Plan (DMP), which involves streamlining multiple credit card payments into one simple monthly payment, resulting in lower interest rates and a lower overall monthly payment.
However, if you’re already delinquent on some credit card accounts, Debt Settlement may be the better debt relief program for you, as it can result in creditors accepting lower balance payoffs. Or, if you have a variety of different high-interest rate debts, a Debt Consolidation Loan may prove to be the best debt relief program, as a DCL can pay off multiple creditors while also resulting in a lower blended monthly interest rate and payment. Contact us here at United Settlement to discuss these debt relief programs and get yourself moving toward a debt-free lifestyle.
About the Author: Steven Brachman
Steven Brachman is the lead content provider for UnitedSettlement.com. A graduate of the University of Michigan with a B.A. in Economics, Steven spent several years as a registered representative in the securities industry before moving on to equity research and trading. He is also an experienced test-prep professional and admissions consultant to aspiring graduate business school students. In his spare time, Steven enjoys writing, reading, travel, music and fantasy sports.