What Is Debt Relief?
Debt relief is any strategy you might take to get out of debt or to manage your debt so that you can function normally and keep up with your bills and living expenses. It usually refers to situations in which your debt has become too overwhelming to manage on your own. Debt relief includes debt management plans, debt elimination programs, debt consolidation, and debt settlement. It also refers to bankruptcy. In many cases, the entire industry that creates debt relief options is referred to as the debt relief industry.
When to Get Debt Relief
There are lots of steps to take when it comes to getting debt relief, but one of the first steps is to recognize you need it. This isn’t hard to determine for most people. Almost anyone who can’t keep up with their monthly payments and is overwhelmed by financial stress probably needs some form of consumer debt relief, especially if they’ve begun to use credit cards to pay for all their living expenses, or are doing things like using payday loans to pay back other payday loans.
How to Get Debt Relief
Many people are concerned about beginning a debt relief program because they don’t know who they can trust. This is a very valid concern and the reason why it’s always a good idea to first seek credit counseling. Due to emotion and stress, there is a lot of understandable fear surrounding debt relief programs and how they work, and a non-profit credit counselor or debt consultant can answer your questions and give you an objective point of view on the options available. They can also help to steer you away from obvious scams.
Once you realize that much of your fear and concern is related to desperately wanting to find a solution, it becomes easier to see what works and what doesn’t and to evaluate which programs might be best for your situation, and which programs might be the safest. It’s also always a good idea to thoroughly research any program you decide to use.
What Are the Different Types of Debt Relief?
Debt relief comes in several forms, some of which can be combined into a comprehensive debt management plan or debt elimination program. Here are some of the most widely used types:
- Personal Budgeting – The right budget can sometimes go a long way toward providing debt relief. Often you’ll need help creating it. Many times it will work best when used with another program.
- Debt Consolidation – This type of debt relief involves taking out a loan to pay your debts, which allows you to bundle many debts into a single, more affordable payment.
- Debt Negotiation – With this program, you make a lower monthly payment into a separate insured account that will eventually be used to pay off a lower debt amount negotiated with creditors on your behalf.
- Debt Settlement – This program is the end result of a debt negotiation, in which your debts are reduced to a lesser amount, or “settled.”
- Bankruptcy – As a last resort, you many qualify for debt relief under the Federal Bankruptcy Code.
Refinancing Your Mortgage
There are other strategies and options for relieving debt such as refinancing your mortgage. Although there are fees involved with refinancing, you can often save yourself a lot of money and lower your monthly payments by getting a lower interest rate on your mortgage. This is especially a good idea when mortgage rates are low.
Renegotiating Your Credit Card Bills
Credit card companies will sometimes negotiate new terms with you. It’s as easy as giving them a call and asking for a lower APR. It only takes a few minutes and can often make a big difference in your quest of relieving your debt. You will be surprised how many credit card companies are willing to negotiate. It’s free, easy and the worst that can happen is that they say “no”. If that’s the case, you can always consider transferring your balances to another credit card.