you are flooded with bills, debt settlement or debt counseling may be a good idea to help you get out from under your debts. Though it may sound like therapy, debt settlement paired with debt counseling is actually offered by professionals that work in companies specializing in helping consumers manage their debt. Along with the advice they offer you, you will also make one single payment to their office on a monthly basis and they in turn will pay each of your creditors.
If you are thinking that they are doing something that you can easily do yourself, you probably wouldn’t be in debt to begin with. Along with forwarding your payments as part of the debt settlement program, debt counselor’s work with your creditors to reduce the interest rates on the amounts due, lower your monthly payment and in some cases forgive late fees. Highly skilled debt counselors are even able to cut the amount you owe on your principal balance on top of the interests charges.
Dealing with creditors can be a stressful process if you are pat due on your bills or having a hard time keeping up with your payments. Dealing with a professional debt settlement service allows you to rid the stress from your life by putting the responsibility of communication on the debt counselor. The person assigned to your case will work as a go between making communication a smooth and tension free process.
Working with a debt settlement counselor has its benefits, but it isn’t always the best option for every consumer. If you take out a debt consolidation loan through a debt counseling company, the interest rate may be manageable, but the loan repayment time will be longer than if you paid off your debts individually. In addition, though your credit may improve due to prompt payment; your final repayment balance will be higher than if you paid of your creditors without the help of a consolidation loan.
Most debt settlement companies offer two types of loans for their repayment programs; unsecured and secured. They work the same way as a normal loan in that secured loans are given against your assets. If you don’t repay your loan, the debt settlement company has the right to seize the assets used as collateral for the repayment loan. Unsecured loans are often offered in lower amounts and at a higher interest rate making them a less attractive choice for consumers who are trying to rid themselves of their current debts.
If you are considering starting a debt settlement program, you should be very careful in the company you choose. Assure that the program has state approval and is part of the BBB. Many companies have opened their doors without proper licensing after the housing market bust and subsequent financial fallout. Unscrupulous companies will take your money and run, while some may suggest you to start counseling when chapter 13 may have been a better option for your case. There are several legitimate companies out there that have been around for a while and are backed by associations. Non- profit debt counselors are also another option since they are often state funded for the benefit of the community.