My Debt Relief Plan

Why You Should Choose Debt Settlement Over Consolidation Loan?

Truth is that debt settlement services are usually the most appropriate solution and only in certain circumstances consolidation loans are a viable option. From all the inquiries we receive every month, 95% need to resort to debt settlement services and can make little use of a debt consolidation loan.
The reason for this is simple: When people realize that their debt situation needs to be addressed urgently, it is too late for consolidating through a debt consolidation loan.

Debt consolidation loans are best used when your credit score makes it still viable to get approved for a competitive loan. Otherwise, if you have already defaulted or missed payments on loans and bills, debt negotiation and settlement services are the only choice if you want to avoid other critical solutions like bankruptcy.

Debt Consolidation Loans Viability

A debt consolidation loan works smoothly when you are current with your outstanding debt. Then, you take out a loan and use the money to repay your debt obtaining a lower rate, a longer repayment program and thus, lower monthly payments. This can imply either savings on interests in the long run, savings on the installments on a monthly basis (more affordable monthly payments) or both.

Yet, there are no direct debt reductions and usually, if you choose a longer repayment program to reduce your monthly payments, you will actually end up paying more on the long run. Moreover, only if your credit history is clean (all your debts are current) you will be able to obtain a lower interest rate to compensate at least a bit for the extension of the repayment program which would otherwise generate more debt in terms of interests.

Debt Settlement Advantages Over Consolidation Loans

With debt settlement you obtain an actual debt reduction. Through negotiations with your creditors, debt settlement agents can obtain new terms on your debt. Successful debt settlements can obtain reductions of up to 60% on your debt and debt payments. Even if you cant get such high debt cuts, you can still obtain lower and more affordable monthly payments by getting longer repayment programs from your creditors.

Moreover, if your current financial situation is complicated, debt settlement agents can agree with your creditors, grace periods for you to recover and retake payment of your debt once your situation has improved. Debt settlement agents are expert negotiators and will find along with your creditors a solution that both can benefit from.
The key to this is the fact that if no solution is found, you may have to file for bankruptcy and that wont be advantageous neither for you or your creditor.

Eventually, after debt settlement, your credit score will begin to improve and you will be able to qualify for a consolidation loan. But if your credit is already ruined, a direct debt consolidation loan is not the solution. Instead, hire debt settlement services to manage your debt and improve your credit and later on, you will be able to consolidate and become debt free again.

1 comment July 1st, 2007

What To Expect With Consumer Credit Counseling

When finances are out of hand, there are many options that people have. Some even look at these options when they are not in trouble, and that is usually because they fear that trouble is coming along very soon. The purpose of consumer credit counseling is to help someone better budget their money, and some companies do help with plans to reduce and pay off debt. They may even be able to negotiate lower interest rates and payment amounts to help a consumer pay off their debt and to clean up their credit.

One thing that most ask when considering going into a consumer credit counseling is if they will be allowed to keep their credit cards. For most companies, the answer is no. You can not pay off old debt and fix your credit if you are piling up new debt while going through the process. You have to be prepared to live within your means, and to find ways to save for the things that you want. You have to be serious when you are going through such a program. When you join, consider all financial things frozen. Most wont allow you to refinance a loan or take out any other type of credit while enrolled.

Another thing to remember about consumer credit counseling is that they will do whatever they can to work out payments and lower interest rates with your creditors, but not all creditors will be happy to do this. This is not a quick fix for your credit either, but rather a process to see you out of debt and to teach you how to remain that way in the future. Think of it as help with your debt, but also think of it as a learning process. Finding and identifying the reasons why you went into debt in the first place are both valuable lessons for the future.

Consumer credit counseling will not be the quick fix that some think, but it is one of the best ways to clean up your financial picture for a stress free and debt free future. Most programs will take years to complete, but the time will depend on the amount of your debt and how much trouble you were in before you signed up for the program. Expect help, but also expect to work for it, and to pay your debts off in a timely manner. Your credit will probably need to be rebuilt once you are finished, but at least you are no longer dodging phone calls from creditors and worrying about paying off a towering debt.

1 comment July 1st, 2007