Nearly everyone needs debt relief, but most are confused about where to turn. Recently published financial reports claim 1 in 7 Americans live below poverty levels. Much of the increase in poverty statistics stems from chronic unemployment
While plenty of debt relief infomercials flood the airways, many of the companies offering promise to eliminate past due taxes and overwhelming credit card debt do not provide written guarantee. That's because creditors are not under obligation to reduce debts.
Creditors will sometimes agree to work out payment plans with debtors. Some will temporarily lower interest rates or eliminate late fees and penalties. Others will reduce principal balances, but usually require debtors to provide upfront lump sum cash payment.
Working with debt help companies may or may not be in your best interest. Before entering into contract it is imperative to conduct research and calculate the true cost of debt reduction. Most debt settlement companies assess startup and monthly maintenance fees. The majority allow debtors to cancel contracts if the company is unable to achieve successful negotiation with creditors.
Oftentimes, fees equate to upwards of 50-percent of negotiated debt. By the time all is said and done, debtors don't save much money at all. In fact, they might be better off attempting to negotiate with creditors without using services of a debt settlement company.
Other types of debt help exist that are free or available for a nominal fee. Some of the most popular include: debt consolidation, credit counseling, budgeting, and personal bankruptcy.
Budgeting doesn't cost a dime, but does require self-discipline. To achieve a positive outcome, debtors must commit to create and stick to a household budget. The task is simple. Make a list of all monthly income and expenses. If expenses are higher than income it's time to figure out how to cut costs or increase income.
Entering into budgeting can prevent debt problems from occurring in the first place. However, it can also help people overcome money problems by developing strategic plans. Many credit card companies and banks offer budgeting software to help consumers see where their money is being spent and develop strategies to pay off outstanding loans.
Credit counseling can be beneficial to individuals who need financial guidance. Although counseling services cost money, they can help debtors learn money management skills that will last a lifetime.
Most metropolitan cities have non-profit credit counseling agencies that base fees according to income. Individuals earning below poverty level can usually obtain counseling at no-cost. In addition to learning better ways to handle finances, counselors might be able to negotiate with creditors to reduce outstanding balances.
Debt consolidation is typically reserved for individuals who own real estate. This strategy requires homeowners to take out a home equity loan or home equity line of credit (HELOC) using their house as collateral.
Homeowners use funds from home equity loans to pay off outstanding debts. Mortgage loans are assessed with a considerably lower rate of interest than credit cards, allowing borrowers to save substantial funds over the long run. Caution should be used with home equity loans because if borrowers default their house could be placed at risk for foreclosure.
Personal bankruptcy should only be used as a last resort. New bankruptcy laws have made it considerably more difficult and expensive to obtain debt relief. The majority of debtors are required to enter into Chapter 13 payment plans which can extend up to 5 years.
Overcoming financial challenges is achievable. However, debtors must become educated about personal finance and budgeting. The Internet is a good source for obtaining information about the various debt relief programs, as well as researching the companies offering assistance.
While plenty of debt relief infomercials flood the airways, many of the companies offering promise to eliminate past due taxes and overwhelming credit card debt do not provide written guarantee. That's because creditors are not under obligation to reduce debts.
Creditors will sometimes agree to work out payment plans with debtors. Some will temporarily lower interest rates or eliminate late fees and penalties. Others will reduce principal balances, but usually require debtors to provide upfront lump sum cash payment.
Working with debt help companies may or may not be in your best interest. Before entering into contract it is imperative to conduct research and calculate the true cost of debt reduction. Most debt settlement companies assess startup and monthly maintenance fees. The majority allow debtors to cancel contracts if the company is unable to achieve successful negotiation with creditors.
Oftentimes, fees equate to upwards of 50-percent of negotiated debt. By the time all is said and done, debtors don't save much money at all. In fact, they might be better off attempting to negotiate with creditors without using services of a debt settlement company.
Other types of debt help exist that are free or available for a nominal fee. Some of the most popular include: debt consolidation, credit counseling, budgeting, and personal bankruptcy.
Budgeting doesn't cost a dime, but does require self-discipline. To achieve a positive outcome, debtors must commit to create and stick to a household budget. The task is simple. Make a list of all monthly income and expenses. If expenses are higher than income it's time to figure out how to cut costs or increase income.
Entering into budgeting can prevent debt problems from occurring in the first place. However, it can also help people overcome money problems by developing strategic plans. Many credit card companies and banks offer budgeting software to help consumers see where their money is being spent and develop strategies to pay off outstanding loans.
Credit counseling can be beneficial to individuals who need financial guidance. Although counseling services cost money, they can help debtors learn money management skills that will last a lifetime.
Most metropolitan cities have non-profit credit counseling agencies that base fees according to income. Individuals earning below poverty level can usually obtain counseling at no-cost. In addition to learning better ways to handle finances, counselors might be able to negotiate with creditors to reduce outstanding balances.
Debt consolidation is typically reserved for individuals who own real estate. This strategy requires homeowners to take out a home equity loan or home equity line of credit (HELOC) using their house as collateral.
Homeowners use funds from home equity loans to pay off outstanding debts. Mortgage loans are assessed with a considerably lower rate of interest than credit cards, allowing borrowers to save substantial funds over the long run. Caution should be used with home equity loans because if borrowers default their house could be placed at risk for foreclosure.
Personal bankruptcy should only be used as a last resort. New bankruptcy laws have made it considerably more difficult and expensive to obtain debt relief. The majority of debtors are required to enter into Chapter 13 payment plans which can extend up to 5 years.
Overcoming financial challenges is achievable. However, debtors must become educated about personal finance and budgeting. The Internet is a good source for obtaining information about the various debt relief programs, as well as researching the companies offering assistance.
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