Taking out a loan and making arrangements for its repayment is a DIY process that may be easy for some and difficult for many but managing a debt is undoubtedly difficult for all. If you are in a fix and find it difficult to continue with the monthly payments availing alternative solutions may seem very tempting but be warned it is not a decision that you should take alone. Consulting with an expert and reputed debt settlement company before so that you know what you are getting into. No matter how simple and tempting it may look, debt settlement will always have its characteristic influences in your financial health.
Debt settlement is certainly not a cup of tea for those who are current and up to date with their loan accounts and its payment. It is even not a suitable option if you are just a couple of months behind your loan repayment schedule. Most importantly, if you are very serious to maintain a good credit score, then a debt settlement is not at all recommended for you.
Consumer Credit Counseling
You must first discuss matters with consumer credit counseling. They are experts in providing helpful tips and advice for better and more effective debt management. If you cannot find enough sources to continue with your repayment, then these experts will even help you to formulate and create a better debt management plan with the creditors. There are several benefits of such plans and its implementation.
- There is a high chance that your monthly payments will be reduced significantly by the creditors.
- You will be able to repay your loan in full with the reduced monthly payments.
- When you repay the original loan amount with nothing waived, it will not negatively affect your credit history.
As long as you are diligent in making your payments each month and on time agreed, consumer credit counseling will not harm your credit history.
Work It Out With The Creditors
Apart from consumer credit counseling, you may also work with your creditors directly to find an easy solution to your problems with debt repayments. You may make a plan on your own to pay off the loan, and if the creditors find it is feasible and reasonable enough, they might even agree and allow you to go ahead with it.
It is, however, better to go through the debt settlement reviews if you intend to work out a way on your own. You will find in these reviews that creditors often have and allow availing a hardship program to consumers who are having financial problems and are finding it hard to make payments on time.
Experts will suggest you emphasize on the word “hardship” when you have a fair conversation with your creditors. These hardship programs are specifically designed by the lenders to help people like you. It may provide a temporary reduction in your monthly payments for about six months or even up to one year. It may also reduce the rate of interest in your credit card or loans.
Debt Settlement Companies
As a last glimmer of hope when all efforts fail, you may turn towards a debt settlement company or professional for instant relief from your problematic situation. However, any expert will suggest you maintain extreme caution when you settle your debt. It is extremely hard to avoid such an option during such desperate times especially when you see promises galore of debt relief. But the National Consumer Law Center and other debt counseling agencies warn consumers while availing the help of such professionals and even go a step further to mark such service providers as unworthy in such situations. The simple reason is that they will get you into deeper and more severe financial trouble.
All Experts Cautions Strongly
The Consumer Financial Protection Bureau, National Consumer Law Center and even all authentic debt settlement reviews will strongly caution you for the risks inherited in debt settlement. They will suggest you explore other options first and then make an informed decision. Studies and its figures show that hundreds of complaints are lodged annually against the debt settlement companies, and the majority of these complaints commonly claim for excessive fees and fraud. There are a few other things to know as the after-effects of debt settlement.
- You will have to pay additional fees apart from the service fees paid to the debt settlers. Such fees include a monthly fee for the setup and maintenance of the dedicated account for such program.
- You will also have to pay taxes to the government on the money exempted from your debt because it is an income on your part according to the rules and regulations formulated by the Internal Revenue Service.
Lastly but most importantly, you will have a badly hit and scarred credit history when you settle your debt.
Hiring A Debt Settlement Company
If you want to go for debt settlement eventually, make sure you hire a reliable company following a few strategic steps.
- Check for their history of complaints with the Better Business Bureau
- Stay away from those seeking money in advance or guarantees a settlement
- Check for fees structured on a percentage of debt reduced rather than the flat rate or debt balance.
Common Alternatives To Debt Settlement
According to a few debt settlement coaches and critics, there are a few easy, effective and productive alternatives to debt settlement option. Few will suggest that erasing your debt by claiming for Chapter 7 bankruptcy and starting all over again is better than debt settlement provided that you have the option. The simple reason behind this is that you can start on the rebuilding process even if your credit history is sullied for years.
If you do not want or do not qualify for bankruptcy, then you can consider a debt management plan alternatively. This service is offered by a nonprofit credit counselor, and it will significantly reduce the amount that you have to repay your creditors every month. This is done by reducing the rate of interest and stretching the EMIs over a longer period.
Amy Walsh is an experienced and skilled business consultant and Financial advisor. She helps clients both personal and professional in long-term wealth building plans. During her spare time she loves to write on Business, Finance, Marketing, Social Media. she loves to share his knowledge and Experts tips with her readers.