Who Can Help With Debt Relief?

October 26, 2017
Who Can Help With Debt Relief?

Whether you’re dealing with credit card debt, student loan debt, or tax debt, paying your bills on time can seem impossible. If managing your debts without getting behind on your payments seems like an insurmountable challenge, you aren’t alone. In fact, debt management is a common issue for consumers, and you have several options to consider. Find out who can help with debt relief and discover the right credit counseling program, debt management plan, or debt consolidation company to help you.

Credit Counseling Programs

For many people who are struggling to pay bills and handle growing debts, seeking out a credit counseling program is a smart step forward. Take a look at how these services work and find out if this type of debt relief program is right for you.

How Do Credit Counseling Programs Work?

Also known as budget counseling programs, credit counseling services offer the following:

  • Financial advice
  • Debt evaluation
  • Customized counseling
  • Savings classes

Most services offer free educational materials so that you can learn the basics of managing your debts, along with counseling sessions tailored to your debt-related needs.

When you meet with a credit counselor, you’ll usually go over your entire financial situation together. Your counselor will discuss your income and debts, your financial goals, and any major issues you have with your finances. Then you’ll take away a plan to start tackling your debt problems. Most credit counselors offer at least one follow-up session to offer support and answer questions as you start to get control over your debts.

How to Find a Reputable Credit Counselor

A variety of companies and organizations offer budget counseling programs. For example, your credit union, university, or other local organization may offer this type of service. Consumer protection agencies can often guide you toward a good credit counselor, too.

Although many credit counselors provide effective services that can help you get your finances under control, not all are legitimate.

  • Watch out for credit counselors who won’t provide free educational information about their services without taking down your contact information or signing you up first.
  • Look out for programs with many hidden fees, too. These signs could suggest predatory credit counselors at work.

To find a great budget counselor, try seeking out a nonprofit program. Next, find out how much the program costs. Very few credit counseling programs are completely free of charge, so make sure you understand how much you’ll have to pay for the service. Finally, ask how the credit counselor will help you devise a plan to manage your debts. If you want one-on-one counseling and help creating a budget, make sure the program offers those services.

How to Create a Basic Budget

If you’re feeling completely overwhelmed by your debts and you want to find a way to get your finances under control, you may be looking for a quick solution for help paying debt. Rather than instant debt relief, however, credit counseling typically offers much-needed help with creating a budget and developing a financial plan.

To develop a budget that works for you, get organized. Gather your pay stubs, bills, credit card receipts, and any other documentation that can help you get a handle on your spending habits.

Once you have everything in order, start thinking about your goals. What kind of debt reduction do you want to achieve and in what time frame? Work with your credit counselor to set realistic short-, mid-, and long-term goals that will help you meet major financial goals down the road. Be ready to take steps to reduce spending and completely reconsider your approach to money management.

Debt Management Plans

If your debt far exceeds your income and you’ve lost the ability to pay your bills, consider temporarily exchanging your financial freedom for help with debt management. When trying to decide who can help with debt relief, find out how debt management plans work and decide whether these plans are effective debt relief programs for you.

How Do Debt Management Plans Work?

To enroll in a debt management plan, you’ll need to disclose all of your debts and work with a plan manager to devise a schedule for paying them back, based on your income. Instead of paying off your debts directly, the plan will do this work for you. You’ll be responsible for depositing a certain amount of money each month, and your plan manager will handle the payments.

While these plans aim to manage and reduce your debts, your plan manager may also be able to negotiate lower interest rates or reduced fees with your creditors. These types of negotiations are not the same as debt consolidation options, however, and debt management plans still require you to pay off your debts.

Debt management plans don’t offer instant debt relief. In fact, some span 60 months, which means they require a substantial amount of commitment.

When to Consider a Debt Management Plan

Debt management plans apply only to unsecured debts. If you can’t afford to pay your student loans, credit card bills, medical bills, or other outstanding unsecured debts, a debt management plan could be a smart choice. If you can’t afford to pay your secured debts, such as your mortgage or your car payment, you’ll need to consider a different option. If you can’t make your debt management payments and your secured debt payments, then you should also consider another alternative.

Think about the following when you are considering a debt management plan:

  • If you aren’t planning to apply for other types of credit anytime soon, you could be a candidate for a debt management plan. Many plans require you to agree not to seek more credit until the plan ends, and some don’t allow you to use the credit that you already have. Consider this aspect carefully, since this arrangement could mean that you can’t use your credit cards or apply for a new car loan for up to five years.

The success of a debt management plan depends on more than your financial situation.

  • If your creditors are willing to work with your debt management plan, then a debt management plan could be a great choice for debt relief. Take the time to call each of your creditors before signing up for a debt management plan to find out whether you need to make other payments before the plan begins or whether any other restrictions apply to your accounts while the plan is in effect.

How to Find a Reliable Debt Management Plan

Many people don’t start their path toward debt relief by pursuing a debt management plan. Instead, they begin with a credit counseling program, and their counselor recommends one or more debt management plans to consider. Many debt management plans work best alongside credit counseling programs. You may need to enroll in both types simultaneously so that you get both the support and the debt relief you need.

Make sure that any debt management plan you consider allows you to keep close track of your accounts throughout the process. You’ll want to be able to get current statements and check your account status to make sure everything is on track. You should also confirm that the plan will submit your payments before the due date every month to avoid late fees.

If you’re considering more than one debt management plan, start first by searching Solvable for the one with the best reviews and reputation. While many plans offer the exact results they say they will, others have been known to mislead customers. Watch out for plans that promise to clean up your credit report by removing late or missed payments, which is both impossible and illegal.

Debt Consolidation Loans

If you have a significant number of debts and the total monthly payments are much more than you can afford, a debt consolidation loan could be a smart choice. Find out how debt consolidation loans work and learn how to find a reliable provider.

How Do Debt Consolidation Loans Work?

Unlike credit counseling programs or debt management plans, debt consolidation combines all of your unsecured debts into a single amount with one monthly payment and a longer payment term. This option is ideal for student loan and credit card debt relief. The payment you’ll make is typically much more affordable than paying multiple debts individually. In addition, most debt consolidation companies negotiate reduced interest rates for your debts, which can substantially lower your total amount owed.

Next, you’ll take out a new line of credit to pay for your consolidated debt. Most debt consolidation loans offer low interest rates, which makes them easier to pay back than other loans.

When to Consider Debt Consolidation Loans

If you can’t afford your debts due to high interest rates and ever-increasing monthly payments, debt consolidation could be your best bet. Debt consolidation experts have the knowledge necessary to negotiate lower interest rates and other concessions that you couldn’t get on your own.

  • If you’re a homeowner, your debt consolidation plan may involve taking out a second mortgage or borrowing against your home equity. While these options may offer effective debt relief, make sure you understand the consequences of missing a payment or defaulting on your loan.
  • If you have relatively good credit, you could be a candidate for debt consolidation. Your credit rating will affect the type of debt consolidation loan you’re eligible for, and bad credit could disqualify you from this option. Debt consolidation can have a positive impact on your credit rating, too, since you’ll get your finances situated and lower the overall amount that you owe.

Taking out an extra loan for debt consolidation can be a drawback for some people. Before moving forward with this option, make sure you understand how long you have to pay back the loan and do the math to decide whether you can afford to make the payments on time.

How to Find a Reliable Debt Consolidation Loan Provider

To find reputable debt consolidation loan providers, start first by reading their reviews on Solvable. Find out how long they’ve been in business and avoid new providers that may not offer long-term assistance. Make sure that they offer debt consolidation instead of debt settlement, which can negatively impact your credit and may not offer the debt relief you need.

In addition, make sure you understand the fees you’ll have to pay for a debt consolidation loan. Is the interest rate low? Will you be responsible for any extra fees?

Finally, calculate the total amount you’d pay when you take out a debt consolidation loan versus what you’d pay to take care of your debts individually. If the loan provider offers substantial up-front savings or debt relief over time, debt consolidation could be a smart option for you.

No matter what type of debt you’re dealing with, we can help. With highly rated debt relief companies and effective debt management tools at your fingertips, we have the resources you need to start reducing your debt immediately. Contact Solvable to learn more about our effective programs for tax debt relief, credit card debt relief, or student loan relief and get the debt relief help you need today.


Image via Flickr by openDemocracy

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