Consider Debt Relief Solutions Wisely

An unprecedented number of consumers have made a high priority of taking action about their unsecured debt problems during the period of the past several years. There are many reasons for this phenomenon, however the two that must surely be most prominent among them are the many financial hardships caused by the recession and the large number of consumers with high interest credit card debt. These two reasons in tandem created an even more difficult problem that continues to threaten the financial well-being of millions even today, and perhaps is even more ominous for consumers for this reason. Being able to make only the minimum monthly payments on these credit card accounts is the problem, and it is because the recession has already placed so many financial pressures on them to begin with. When just the minimum payments are paired with high interest accounts, repaying the debt can easily take 20 years or even longer. As appalling as this situation is for consumers who are in this horrible mess, they should not be too quick in deciding on a remedy for their particular situation. The reason for this caution is that some of the credit solutions available can have some very regrettable consequences for the consumer when the related process does not run as smoothly as anticipated or hoped for.

To try budgeting your way out of the problem is always the first choice for unsecured debt relief. With a minimum of negative consequences and at a minimal cost, some situations can be resolved for the consumer completely by using this method. If this proves unsuccessful then the choice needs to be made very carefully from among three options offered by debt relief companies. Each of these options (bankruptcy, debt settlement and credit counseling) has a set of characteristics that will suit some debt situations better than the others. It is very important to match the solution to the problem at hand appropriately, otherwise needless risks may ensue that can create a larger problem than the one that existed when relief was first sought. The first option to try on for size is usually credit counseling, as it is the only one of the three that will cause no credit score damage. If it is determined that the consumer can afford the payment required for the debt management plan (DMP) available in credit counseling, then this is likely the wisest choice to make. While the debt relief benefits of bankruptcy and debt settlement can exceed those of credit counseling, these two options will cause some serious damage to the consumer's credit.

Credit Card Debt Relief in Plain English

The initial step to seeking help is to be aware of your alternatives. As consumers continue to struggle to eliminate credit card debt, many are searching for help but don't know the different options available. This lack of awareness can make consumers feel vulnerable and consider debt counseling services to be suspect. Debt relief help doesn't have to be confusing, and educating yourself can appease concerns about being mistreated.

There are several possibilities available, however the two most successful and regularly used ones are credit counseling and debt settlement:

Credit Counseling

Credit Counseling is also referred to as Debt Management. It calls for negotiations with creditors to reduce interest rates and fees on your credit cards so that you can pay one consolidated monthly installment to a credit agency, that is utilized to pay all creditors. Credit counseling is not an easy option and, sometimes takes 3-5 years to complete. Although the fees and rates can be reduced, it might also need a significantly higher monthly obligation since you’re still repaying the principal completely. Therefore, enrolling in a debt management program may not be right for everyone, and debt settlement could be considerably better.

Debt Settlement

Debt Settlement involves reaching negotiated settlements with your creditors to acquire significant reductions on the principal amount that you owe. It's the fastest and most aggressive way to get out of debt. You can get rid of as much as 40-60% of your total debt and be out of debt in 1-2 years. For consumers with plenty of unsecured debt (usually greater than $10K) who're unable or only able to make the minimum monthly payment, debt settlement is a viable solution. It will, however, have a negative impact on your credit history. This is contrary to credit counseling, which will not hurt your credit rating and helps you pay down debt responsibly.

Next Steps:

To start off, the best and easiest action to take would be to first contact a legitimate debt counseling company and get a free consultation to talk about your expenses and determine the most effective solution customized for your situation.