A quick look in most people’s finances and one would find how conveniently people take loans without foolproof planning of paying off their debts in time and being free of all the stress. This is a prolonged trend in the urban society, which calls for several organizations to come up with schemes and programs that are designed to help people to finally start taking small steps toward their freedom from debts.
There are several known terms like debt consolidation, balance transfer, debt-management plan, debt negotiation, bankruptcy, self-payment initiative, debt settlement, and customer credit counseling. These are programs or plans that can help an individual to understand their debt situation and take actions in support of a debt-free life. Below is a brief description of these plans or programs.
One of the most popular ways to achieve debt relief is getting a consolidated debt loan and using all the money to pay off that one consolidated loan instead of managing and paying several loans at once. Debt consolidation loans are available in secured and unsecured forms, where personal loans are often unsecured. Additionally, with a good credit score, one can get a consolidated loan with an interest rate of around 5.85%.
People with high-interest credit cards debts can most likely transfer their balance to a new credit card with lower interest or even 0% interest. However, it is important to compare the present interest rates with the new interest rates and then make the decision to go for balance transfer. Additionally, if one gets a 0% interest balance transfer, then they would get a window of 18 months in which they would have to pay off their new balance.
These plans help people to efficiently make a plan to manage their overall finances so they are able to pay off their debts on time. To make a debt-management plan, one can take the help of a credible consumer credit counseling agency, where a counselor is assigned to the individual to help develop of a creditor-friendly plan. Of course, this means that the plan is also discussed with the creditors for getting their approval.
Negotiating with the lenders is always possible and the most common negotiation is that of debt settlement. Debt settlement includes debtor and creditor to reach a common ground where the debtor appeals to pay a lump sum amount as which is lesser than the original amount that is owed. People can also take help of a debt negotiation company to do the negotiation with the creditor for them.
In some cases, people often find debt relief in declaring bankruptcy. One can declare bankruptcy by hiring a bankruptcy attorney who manages the entire process of chapter 7 bankruptcy (most popular type), where all unsecured loans are discharged. This includes credit card debts, personal line of credit, old cell phone bills, collection agency accounts, business debts, medical bills, and more. However, chapter 7 bankruptcy does not include discharging family support, alimony, spousal support, student loans, and auto or mortgage loans. One downside of bankruptcy includes a long-term (almost 10 years) impact on the credit score.
The impact on of a debt relief plan on the credit score of an individual depends on how well one manages their entire debt relief plan and which plan one chooses for the same. Bankruptcy leaves a negative impact on the credit score for as long as 10 years, whereas, a debt consolidation loan tends to be good for the credit score. Therefore, a detailed study of the relief plans and their impact on the credit score is important.
A lot of success on finding actual relief from the debt depends upon the way a debt relief plan is designed, keeping in mind the personal financial status of every individual.
Debt relief plans and companies understand that every client has trouble in paying off their existing debts; therefore, they keep in mind the existing debt cost while designing their own fees. However, it is still important to consider the cost of the debt relief plan by comparing different plans.