At the same time, you can do with getting things early and paying for them later, rather than save upfront – imagine saving for a house. Instead, a mortgage makes a better idea. Then, a car loan will give you reliability and a bit more control over your commute.
Even credit cards can be handy, despite their high interest rates. You can use them for a series of perks they come with – assuming you pay everything back on time and you avoid the high interest rates. Basically, make sure they cannot take your finances over.
Now, debt can be a problem, but it can also be helpful. There are optimal debt solutions out there – such as debt relief companies, which will help you manage debt in a more affordable manner, not to mention avoid interest fees.
You do not have to wait until debt takes everything over. Instead, a debt relief company can help you pay less than what you owe – the so-called debt settlement, which is a strategy that will give you great results overtime.
Understanding how optimal debt solutions work
So, what does a debt relief business do? To keep it simple, people behind these companies are well aware of local laws and can turn them in your favor. They will not help you out of nowhere, but for a profit, of course.They help people in debt obtain settlements, so they end up repaying less than what they normally owe. Such solutions are not aimed at people who can manage their finances but want to pay less. Instead, they are made for those who cannot find a solution to their debt.
While there are plenty of companies out there, it is worth noting that not everyone is worth your time and money. In fact, there are plenty of scams too. This is the reason wherefore, you must be extremely cautious.
For example, avoid companies offering to help you, regardless of how authentic they seem – especially if they approach you out of nowhere. No matter how good their fees are, you would rather deal with a reputable company instead.
On the same note, you must avoid working with companies that try to collect fees before they actually settle the debt – these are usually scams. You are normally supposed to pay your fees once everything is over. Stay away from companies advertising new governmental programs too.
Understanding how debt settlement works
Debt settlement is a concept that many people overlook, mostly because they cannot understand how it works. They find it difficult to believe – so, you can practically borrow money, then pay less than what you owe.Such a company will shoot for debt settlement as the best possible option. You will need to save some money on a monthly basis – basically, use a dedicated account. You will then use this amount of money to settle some debt later on.
Experts working for such companies know every aspect of the law. They will also negotiate with different companies and creditors. The goal is to offer less than what you owe. Once the program is over, if successful, you will become debt-free and able to move on from the nightmare.
Now, while the ideal scenario may seem ideal, the truth is it does not always work this way. This is why you need to go for a reputable company with a good track record. For instance, some companies may ask you to stop all payments until the debt is settled.
This means you may also be asked to stop paying bills in order to save money for the settlement. This may have serious consequences over your utilities. At the same time, it will most likely affect the credit score – more debt from other directions then.
Furthermore, think about the fact that optimal debt solutions are not guaranteed – simple as that. Some lenders may accept the idea of debt settlement, but others will refuse you and keep chasing you. There is no guarantee that your program will be successful.
Figuring out how debt consolidation works
Debt settlement and debt consolidation are two completely different concepts, even if less experienced people use the terms interchangeably. Debt consolidation is crystal clear to understand – it combines more debt into one large consolidation loan.This loan is taken with the sole purpose to consolidate all the other debts. Instead of messing about with plenty of creditors, you only deal with one – a better interest rate and just one monthly payment. Such loans are offered through lenders, credit unions, and banks.
If the loan application is accepted, you end up dealing with one lender only. Debt consolidation can definitely help with lower interest rates, but it will also help you psychologically. Instead of having eight payments spread over a whole month, you only have one to focus on.
Each loan will give you different features, terms, and conditions. You may or may not end up saving money. You may or may not end up with lower interest rates. There are too many factors to take into consideration.
Moving on, such a loan can be secured or unsecured. If secured, chances are you will get a better deal. But then, you may need to use assets as collateral – avoid using your home as collateral. Some creditors may ask for the car or perhaps the retirement account.
Debt settlement versus debt consolidation
Debt consolidation is pretty clear – you combine more debts into one only, and you take a loan for it. On the other hand, debt settlement has a completely different strategy. When settling debt, you basically tell a creditor that you cannot do it and ask to pay back less money – simple as that.The reason wherefore debt settlement seems to be a better option is the fact that you can overcome debt without paying everything in full. Sure, bankruptcy is similar, but it will ruin you financially. After all, bankruptcy is a last resort, regardless of how bad you are with money.
It is critical to know that no creditor has any obligations whatsoever. They can refuse meeting you for negotiations, but they can also refuse your offer. If they do, you will most likely need to pay everything at once or at least start with a big lump sum, so save upfront. Otherwise, it may not be an option.
Strategies, risks and optimal debt solutions explained
You may find this funny, but people who engage into a debt settlement program and still make payments will not be given too much credit. If they still make payments, that is a sign that they have a bit of control over their finances, so they have less negotiating power in the process.On the other hand, those with no payments at all will gain a bit of extra control. In other words, those who want to go for such programs must stop making payments at all. Sure, the credit score will be drastically affected, but after all, it can be repaired in the long run, as you start making payments on the new debt.
Going crazy on your debt will target the credit score and can send you to the poor range. In other words, finding financing or credit cards is almost impossible, so you must get on top of your expenses by yourself. The higher your score is in the beginning, the harder you will fall.
Keep in mind that late payments could stick to your credit report for years – depending on where you live.
At the same time, failing to pay your debt on time will bring in fees and extra interest, not to mention creditors bothering you at your door. If you fail to settle, all these fees will stay, meaning you will find it even more difficult to deal with debt.
Get ready for phone calls, people knocking on your door, or even court, especially if the debt is too high. Debts that are worth the trouble will lead to court, and this may cause wage garnishment. General rules are fairly simple to understand.
The more cash you have ready for a debt settlement, the easier it will be to reach a common point with creditors. On the same note, the longer your debt goes unpaid, the more likely you are to be taken to court.
No one guarantees that taking such damage will lead to a positive outcome. Lenders may still refuse settlement programs, and they may still ask for more money than what you had in mind, so no one can tell the final result.
On the same note, some creditors will not even work with debt collection agencies. They work directly with consumers or even nonprofit organizations, but not with debt settlement companies – they reject such a negotiation on the spot.
As you can see, there are both pros and cons to such modern optimal debt solutions. At times, you simply have no other options, but to look for help. But then, there are times when you could work your way around.
Debt settlement versus bankruptcy
If everything works by the book and you show the will to cooperate and commitment, everyone benefits from it. You manage to get out of debt and perhaps save a bit of money. Debt settlement companies gain their commissions for helping you and lenders, while lenders would get some of the money back.Filing for bankruptcy would mean they gain nothing whatsoever. Now, filing for bankruptcy means your non-exempt assets will be liquidated. You lose all the important things you own – those that hold some value, of course. They will be sold to help creditors.
Some of the things you could lose include cars, household possessions, home equity, retirement accounts, and so on. Obviously, you will not be left with the clothes you wear only – certain things for a decent living will still be left behind.
If you take your time to compare debt settlement and bankruptcy, you will realize that bankruptcy is much faster. The process is less time consuming. The process is legal and will cancel all the phone calls or people coming to your door – it will also cancel all potential lawsuits.
Debt settlement cannot offer such a guarantee.
However, while bankruptcy looks like a better option, the truth is there are other good reasons wherefore you should avoid it. For instance, you will need to give up on possessions you would like to keep. Perhaps you do not want your finances to end up on public records.Your future finances will be affected because no creditor will trust you again until you manage to rebuild your credit score. Furthermore, job opportunities may also be affected – some professions will take your credit history into consideration.
Then, there is another issue that may arise. Can you actually afford a bankruptcy lawyer? Bankruptcy is not a valid option for everyone and becomes the last resort. Unless you know what you are doing, you will require an attorney.
Debt settlement, on the other hand, will give you the opportunity to prove a hardship in your life. Maybe you lost your job, or perhaps you have less hours of work now. A medical expense could be an issue too, not to mention death in your family or perhaps a divorce.
In terms of time, filing for bankruptcy will most likely take less than half a year. The process will usually take less than that, and everything can be done in a few months only. On the other hand, debt settlement may take years. Debt settlement is not that intense, though.
Bankruptcy stays on the score for years, while debt settlement allows you to recover much faster. Should you go for debt settlement, ensure you can handle it. Many programs will require saving money for 36 months or even longer – a special account where you gather money for the settlement.
Debt settlement versus minimum monthly payments
Some people simply cannot save the money for debt settlement, so they look for other optimal debt solutions – how about the minimum monthly payment then? While the monthly burden is lower, the idea is not so good if you have high-interest debt.It may take years to repay the debt. In fact, if you do the math, it could take decades before you could call it even. It obviously depends on the debt, the minimum payment, and the interest rate. Interest keeps adding on a regular basis, so making minimum payments will bring in minimum progress.
Assuming you stick to this option, you will become a profitable option for creditors. The good news is your credit score will improve this way. But then, the idea is to avoid spending money to boost the credit score. After all, a good credit score will not really pay when you retire – money will.
Other than that, high debt may also affect the credit score, so rebuilding it will take ages. As you may already know already, the more you drag it, the more you will pay. In some cases, the interest rate may even outweigh the principal.
Assuming you want to go for debt settlement after all, what kind of companies should you look for?
National Debt Relief for a great overall experience
Established throughout the financial crisis in 2009, National Debt Relief has the primary goal to help consumers overcome debt in a reliable way. Everything is crystal clear, and there are even some incredible results mentioned on the official website.The initial consultation is free. Explain your situation, help the counselor understand the circumstances, and discuss potential solutions. Just like other similar companies, this one will ask you to save money on a regular basis in a separate account in order to use it for a settlement.
National Debt Relief will also negotiate on your behalf – it is a no win no fee service.
DMB Financial for credit cards
DMB Financial was established in 2003 and has the primary goal to help with credit card debt, yet other forms of debt are also covered. Results are mentioned on the website, so you can get an idea about what to expect. Plus, the company is part of the American Fair Credit Council.
The process can be successful within 36 months only, yet you should normally expect a bit more. It all begins with a free consultation that will determine your goals and current situation. The program is deeply customized to match your necessities.
Although the company is specialized in unsecured debt, it will also help with other issues.
CuraDebt for tax debt relief
CuraDebt has been around since 2000 and provides a free initial consultation if you face debt. It seems to be specialized in tax debt relief, yet other forms of debt can also be targeted. Like other companies, it provides some amazing results over its website.
While you do not have any monthly administration fees, get ready to pay about 20% in fees. What makes this company unique is the fact that it goes the extra mile and targets tax debt – something that other companies choose to avoid.
Apart from tax debt, you can seek help for personal loan or credit card debt too, among others.
Accredited Debt Relief for easy settlements
Accredited Debt Relief was created in 2011 and offers debt settlement in a series of different forms – if you are lucky, based on the successful cases presented on the official website, you may end up paying as little as 30% of the original debt.
It all starts with a free consultation, so a counselor can assess your situation and circumstances. If you are suitable and your case looks doable, the process is taken further. Obviously, you will need to start saving money in a separate account too.
The company will carry on negotiations in your name then.
New Era Debt Solutions for customer satisfaction
Around since 1999, New Era Debt Solutions has helped with settlements over $300 million overtime. You will not pay anything upfront, and there are no monthly fees for the administration. Fees are charged when you start seeing results only.
Again, you must start saving money in a separate account. While you save, the company keeps negotiating on your behalf, trying to find a better deal for your situation. You could be debt-free in 28 months, but you should have no expectations here – each situation is different.
Each client is assigned an attorney and nothing changes overtime, so you can build a connection.
Frequently asked questions
Still undecided about the optimal debt solutions for your case?Does debt relief hurt the credit score?
Yes, it will. Once you stop making payments, your credit score will fall. This is not the main thing to worry about – late fees and charges will also apply.
How much does debt relief cost?
Opt for a company that offers a no win no fee policy. You should not pay anything upfront – you struggle with debt anyway. Most companies will charge about 15% to 25% of the total debt in the program.
Is debt consolidation a better option?
It depends. If you can still get a loan, it may save you money on interest rates for other debt. However, this option is not suitable for everyone.
Conclusion
As a short final conclusion, there are quite a few optimal debt solutions out there to help you get out of debt. Each of them has both pros and cons, and each situation is unique, so what works for some people may not necessarily work for you as well.Debt settlement is a great choice, but then again, it is not suitable for everyone. The good news is that major companies tend to provide free consultations, so you will know precisely whether or not your case is worth a try.
