Hiring a debt relief firm can help if you are struggling with debt and looking to avoid bankruptcy. A reputable debt relief company can work with your creditors to resolve your debt for less than what you owe. This will help you become debt free quickly. According to dallasnews.com, debt relief companies can help you become debt-free, but you must work with a company with positive reviews and reasonable fees. Some firms charge a significant fee for their services, which may cause more stress than help. A reputable debt settlement firm will create a savings account in which you will deposit money for a set amount of time. The firm will also work with your creditor, and you will stop paying debts during the negotiation period to expedite the settlement process. Here are six things to consider when choosing a debt relief company.
- Debt Management Plans. A debt management plan allows you to select which debts to register within a program. Eventually, you will be required to make one monthly payment that spreads among your creditor according to the plan terms. One potential benefit of the debt management plan is that you will not do away with credit to make this one deposit. Your debt relief agency will distribute funds to your creditors from the account each month. They will also negotiate on your behalf for lower interest rates. These programs work well for consumers and help them pay all their debts in full, plus any fees the firm charges to facilitate the program.
- Debt Settlement. If you can successfully resolve your debt, you may save money by reimbursing less than the entire balance you owe. The downside is that settlement is not always successful. So, the project can be expensive since you typically have to pay a percentage of your debt to the firm handling the settlement for you. Consumers should understand that debt settlement is a last-ditch choice before declaring bankruptcy. This means that you have little to no money. So, ensure you choose an affordable debt relief company with reasonable fees.
- Debt Consolidation. Your local credit union is the most secure place to start looking for debt consolidation options. The best thing is that the law prohibits credit unions from charging more than eighteen percent interest on the loan if they agree to give you a loan. Debt consolidation refers to taking out a new loan to pay off other debts. This means you will combine multiple debts into a single debt with better payoff terms. You can get a lower interest rate or monthly payment, or both. Debt consolidation can help you if you struggle to keep up with multiple bills and deadlines from different companies.
- Debt Counseling and Credit Counseling. The credit counseling route is primarily for people with manageable debt who are willing or able to work on their spending habits. In a typical case, you will meet with a credit counselor to discuss your budget, debt, and finances. However, you should take a deeper look into your spending habits and debt to help devise a plan to manage your finances independently. Non-profit credit counseling agencies, in most cases, may offer these services for free.
- Debt Forgiveness. Creditors sometimes consider these as the last choice. Some creditors can agree to cancel your remaining debt though there is no guarantee that they will. You may be able to negotiate some debt forgiveness on your own if you have some cash available to make a lump sum payment. A debt relief company may also talk to your creditor to agree on a lump sum payment of the primary amount and forgive the interest. However, debt forgiveness sounds too good to be true, and it may have serious drawbacks.
- Value of Your Collateral. Collateral is said to be something you agree to give to the bank as a guarantee of repayment. Loans that involve collateral are secured loans, while those without collateral are considered unsecured. Secured loans have lower interest rates than unsecured ones because the firm can recoup its money if you do not reimburse it. However, your collateral’s value will determine the amount you can borrow. For example, when you buy a home, you cannot borrow more than the home’s current value. That is because the firm needs the assurance that it can get back all of its money, if you cannot keep up with payments.
Ensure you partner with a trusted debt relief company that will do everything to help you become debt free.