It is not common for Americans have credit card debt. USA Today reports that the average credit card balance has risen to almost $6,200 and that the average American has four cards in his wallet.
High-interest, unsecure debt is easy to accept than pay back. Credit card obligations are a prime example of this high-interest, unsecured debt. The rising cost of living makes credit essential for many families, but cardholders have more options to accumulate debts due to their credit limit.
Many Americans find themselves in debt due to medical bills and personal loan, as well as essential expenses such housing and utilities. What is the result? These days, many people struggle to keep their finances afloat.
For borrowers who are buried in unsecured loans, debt relief may be an option. Like any strategy to escape debt, this strategy comes with its own pros and cons. Continue reading to find out more about the benefits of a debt relief program, and what services they can provide.
What happens in a Debt Relief program?
Before you decide on any debt elimination strategy, it is important to understand what to expect. First, determine if you are a good fit for debt relief. This is also known as debt settlement or resolution. Most debt settlement companies will only accept unsecured debts or those that are not tied to any physical assets. Mortgages and auto loans are no longer available.
A debt settlement agreement approval usually involves showing a recent financial hardship.
- Layoffs/job losses
- Work hours reduced
- Medical expenses
- A death in the immediate family
You will be required to deposit a set amount each month into an account you manage if you choose to enroll in the debt relief program. You will continue to deposit until you reach a certain amount. This depends on how much money you have saved up and how much debt you have. Your program’s negotiators will contact creditors to try to negotiate a lower percentage of your account balance in order to settle the account in one payment.
Once an agreement has been reached, money taken from your account will be used to fulfill your side of the bargain. The debt settlement company that you work with will charge a percentage of the final resolution. Depending on the amount of your debt, ability to pay monthly payments, and whether or not you are willing to make deals, debt settlement can take between 2-5 years.
Tips to Find a Good Debt Relief Program
We’ve described what happens in a good credit relief program. This means that it’s trustworthy and well-equipped for helping its customers.
Reputable companies won’t collect any fees up front. This is the most obvious sign of a scam. Legitimate companies will clearly explain their fees to potential customers. They will also provide all the information needed to make an informed decision about signing up.
Avoid companies that make promises about debt settlement outcomes. Industry leaders have a lot of experience in negotiating but it’s impossible for them to predict what will happen. False hope, such as “We can settle your debt for only a few cents per dollar!” – is more about ripping customers off than offering genuine relief.
A good program for debt relief can help you pay off some or all of your unpaid debts. However, a bad company will take your money and make you poorer than before.