Debt Consolidation - Debt Relief Services

Make no mistake about it; these are difficult economic times. Lots of people have taken a hit on their investments and 401k’s, and many more have seen their incomes drop or dry up. Faced with uncertainty about your future, you may be seriously re-evaluating your debt vs. income, or, worse yet, you may already be in trouble and in need of help in the form of debt relief.

It’s not an easy decision for most people. It can be hard to know where to turn or what to do about that pile of credit card debt that shows up in your mailbox every day. There are debt consolidation options out there, but some of them are riskier than others (and some are outright scams, to be avoided at all costs). This site is here to help you navigate your way through this maze. So let’s have a look at what’s involved, and what’s available as far as debt relief.

• Debt Management Programs: How They Work
• Debt Settlement (Avoid Bankruptcy)
• Debt Consolidation Loan Options
• Debt Consolidation Service Providers: How To Choose The Right One

Debt Management Programs

This process essentially puts a third party between you and the credit card companies. With so many people behind or in default, they are much more likely to settle for a percentage on the dollar rather than see another cardholder go into default. The lenders will usually agree to knock down most of the fees and charges, drop their interest rates, and go for a lower principal on the balance.

There are plenty of reputable firms and agencies that can provide debt relief in this way (such as CCCS). The down side of this is that, in most states, it will impact your credit rating, even though you’re paying off the cards. Unfair? Maybe, but still true.

Debt Settlement

This is sort of a next step up from debt management. A third party will actually ask the borrower to stop making payments on the cards, and will handle any collection calls. They will usually take a percentage of the principal for themselves, and the program may take two to four years to discharge the debt. In some states, the creditors may still sue you for the balance of the credit card debt. Also, the ‘forgiven” debt is considered taxable income by the IRS, so you may have a tax liability at the end of the year.

Debt Consolidation Loan Options

You may be able to take out a loan to consolidate debt and pay off all balances in one lump sum. The pitfalls here, though, include the Catch-22 of needing a solid credit rating to take out the loan. You may be stuck with a fairly high interest rate (although lower than the 18-20% or more associated with credit cards). Some lenders may not consider you if you have less than $10,000 in unsecured debt.

Overextending a cramped budget may not allow much for emergencies, and most creditors for debt consolidation loans will impose a nasty penalty for a default. The upside, though, is that by paying off your credit card debt in one go, you shouldn’t take too hard a hit on your credit rating.

Debt Consolidation Service Providers

This can get tricky. Unfortunately, hard times also invariably bring out the scam artists. Use your common sense, instincts and gut feeling. Check with the BBB, like you would for any provider. Comparison-shop between several service providers. Do they offer on-demand access to your account? Certified counselors? Educational services? A monthly newsletter? Tread carefully here, or you can wind up in worse shape than you started. And remember, as always, if it sounds too good to be true, it probably is.