Pro Finance Blog | Personal Finance and Money Management Tips

What Makes a Good Debt Relief Program?

A good debt relief program may be all it takes to finally get you out of debt. The sooner you enroll in one, the better your chances of managing your debt and stopping it from ballooning further. The challenge now is finding and choosing a debt relief program that fits your needs and financial situation. This can be done by first getting a list of programs that you have the option of joining. Then, you can find out the pros and cons of enrolling in each one and compare and contrast your choices.

Here are some of the most common debt relief options and some considerations that can help you find out if a particular program is good for you:

Debt Consolidation

Debt consolidation, as its name suggests, refers to a program where you consolidate all your unsecured debt in a single one. This involves taking out a loan to pay off all your other debts. One of the primary draws of debt consolidation is that it allows you to easily manage a single debt instead of trying to pay off multiple ones with varying interest rates all at the same time. It will not substantially save you money like debt settlement will though.

The complication, lies in getting a loan that is substantial enough to completely pay off all your other debts. With a good credit score, you might be able to get one with a reasonable interest. But if your credit score has already taken a hit, this may not even be a feasible option. And even if it were, it’s highly likely that the bank will offer you a consolidation loan that has a higher interest rate compared to that of your other debts. You still are paying of the full amount of your debt. 

Balance Transfer

Balance transfer refers to a program where an outstanding loan with high interest rates is transferred to a credit card with lower or zero interest rates, fewer penalties, or more benefits. This is offered by credit card companies, usually for the purpose of promoting their services over that of their competitors, and the free period can last anywhere from 6 to 21 months. It’s an option for people who want to find relief for stifling interest rates. This can help, but will not alleviate the burden of your debt.

But before signing up for a new credit card with the intention of transferring your outstanding balance, you need to pay attention to a few details, like if you actually qualify for a 0% interest. This, once again, involves having a good credit score. If you’re in the clear, find out what the balance transfer fee is, see if there’s a cap to the amount you can transfer, and make sure you understand the penalties. Some balance transfer programs may also apply a high interest rate once your balance starts incurring charges, so check this detail first before you make your mind. Debt settlement will still be a better way to dramatically decrease the debt you owe. 

Debt Settlement

Debt settlement involves negotiating with your creditors with the aim of lowering your debt, all in exchange for a substantial, one-time payment. This method, which is also known as debt negotiation, is typically done with the help of debt settlement companies. A successful negotiation can slash a significant percentage off your existing balance. This means that you’ll only have to pay the remaining percentage in order to be fully forgiven of your debt. The entire process, from start to finish, can take anywhere from 24 to 36 months. Debt settlement is a great option if you simply find yourself trapped under a huge amount of unsecured debt and if you want to be free of debt in the shortest possible amount of time.

Partnering with a credible debt settlement company is key to ensuring the success of this program. Find one that will give you a listening ear and help you go over all the details of ensuring that you can consistently keep up with the monthly payments. This fixed monthly payment will go to a savings account and make up the one-time payment to your creditors.

Freeing yourself from debt will prove to be a challenging task, especially if you’re facing it by yourself. Finding the right help and the right program as early as possible can go a long way in making the process faster, easier, and more efficient.