Have You Considered Debt Relief?

Have You Considered Debt Relief?

Being in debt can be such a trying moment. At this time, bills keep piling up. To make matters worse, you are trying to keep up with your expenses. This is usually a time to consider debt consolidation. It might be the last option to get back on your feet. 
 
There are several debt relief companies that would help you in this. It is, however, a good idea to know all about debt settlement. This will give you adequate information not to be scammed by certain companies. If you have considered debt relief, you can take some hints from this article.

What is Debt Relief?

Debt relief is when your debt is forgiven either partially or fully. In short, the debt is written off. It means that the creditor accepts less payment than what you initially borrowed. Debt settlement, therefore, involves a debt settlement company that acts as a negotiator to reduce the amount of money owed. 

You can pay half the amount and the other half is not charged. The debt is then paid in a lump sum. You get to deposit some money on a monthly basis until it is enough to cover the debt. It is a way of setting the bill and it takes a specific amount of time. This varies according to the type of debt you have. You might need a lawyer for the process to be easy and quick.

When is Debt Relief Relevant for You?

Contemplating on debt consolidation is not simple. Nevertheless, it can be the only option you have left. It is relevant for you if the debt equals half your gross income. The unsecured debt can also be more than your income. At this point, debt settlement will get you out of the tough situation.

You can resort to debt relief if you have no other way of repaying the amount you owe. This means that you are even struggling to make ends meet. You might have cut the budget on spending but still, you can’t raise the required money. Then, debt consolidation will help you out.

Importance of Debt Relief

Debt relief is important because it gets you out of debt. It helps you cut some costs. This is true because at this time you are offered lower interest rates. After that, you can learn from your financial mistakes. You analyze how you got into debt in the first place. Subsequently, you can know how to save and invest. 



Benefits of Debt Consolidation

Debt relief comes with some advantages. The benefits are as follows.

– Saves Money

First, you will get to pay a less amount to the creditor. When the debt consolidation company comes to an agreement with your creditor, the money to be repaid will be lower than the borrowed amount. You will pay the negotiated amount agreed upon. On that account, you can save money. All the debt is settled in monthly payments.


– Repayment within a short period

Another plus side is that you can repay the debt within a short time. This can be from two to four years depending on the amount. If you were paying back the normal debts, it would take time and also interest rates would be high.


– Bankruptcy avoidance

You will avoid the dreaded bankruptcy. Debt settlement helps you pay off the money. This means that you have dodged bankruptcy bullet which affects your life. After setting the accumulated debt, your financial status can pick up slowly.

Disadvantages of Debt Relief

There are drawbacks associated with debt settlement. Although it can be a debt solution, it has its limitations.

– It damages the credit score

Your credit rating will decline. You will find a difficult time applying for a loan or mortgage and credit cards. You will be financially hurt. The credit score will drop by about 65 to 125 points.

– Interest and penalties pile up

When you fail to deposit the amount, you will be charged for late payment. Penalties will be the most disadvantageous part of the process. Interest will also be a part of the debt settlement. 

– The high cost of debt relief fees

Companies charge a high amount to negotiate on your behalf. This means that you will dig deep into your pocket to pay them. The fees can be from $500 to $3000 and more. They charge 20% to 25% of the final debt settlement.

Conclusion

Debt relief is vital to get rid of debts. In spite of that, some limitations are also linked to it. Three are additional fees while paying off the debt like interest and penalties. This can be straining financially. If you decide to get debt relief, do in-depth research on the best companies.

 

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