Debt reduction program - 3 Strategies to reduce your debts legally

If your every paycheck is taunting at your face and you're not finding a single exit to get out of overwhelming debt load, then debt reduction might be the program you are looking for. A debt reduction program helps you reduce and repay your debt faster than ever before, and helps you start a fresh financial journey.

Table of contents

• What is a debt reduction program?
• How does a debt reduction program work?
• What are the 6 benefits of a debt reduction program?
• What are the 3 debt reduction strategies you can apply?
• What are the 7 reasons behind consulting a debt reduction attorney?

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What is a debt reduction program?

Debt reduction program is a unique debt relief approach that speeds up your debt free journey by reducing the debt amount you're obliged to pay. If you want to reduce your debts through a debt reduction program, you either can contact a professional debt reduction company or do it on your own. However, check the kinds of debt that can be paid off through debt reduction program before you approach a company.

A debt reduction program's primary goal is to provide the debtor with the most efficient, value-for-money, and easiest plan to achieve a debt free life without filing bankruptcy. Debtors, who are enrolled in debt reduction or settlement programs, often start to live debt free within 12 to 48 months.

How does a debt reduction program work?

Read below to know how a debt reduction program actually works:

Step 1: Get in touch with a debt reduction company and consult with one of their debt arbitrators. The debt arbitrator will assess your financial condition, and figure out a suitable way for you to tread on.

Step 2: Fax them your most recent statements that include the name of the creditor, your present balances, and a brief history of your recent account activity. However, if it's not possible for you to submit the details, you can also submit a copy of your most recent credit report.

Step 3: The debt reduction company will assess your overall financial health, your debt amounts, and interest rates. A debt arbitrator will thoroughly discuss with you the ins and outs of the program to provide you with an idea. The debt arbitrator will further decide whether or not debt reduction is the best option for you.

Step 4: Once you're convinced that debt reduction can really help you get out of the financial crisis, you can ask the debt arbitrator to send the written agreement at your home. However, before signing, read each clause carefully. If you have any confusion regarding any service or fee, you can call the arbitrator and clear your confusion.

Step 5: Once you sign the agreement, the debt reduction company will open a trust account in your name. Here, you need to deposit at least 50% of your total outstanding balance.

Step 6: After you have deposited the amount in the trust account, the debt arbitrator will reach your creditors and try to settle the debt. If the creditors accept the settlement offer, then a formal contract will be drawn up. Once the contract is signed by the concerned parties, the debt arbitrator will settle the debt with a lump sum payment by taking out the funds accumulated in the trust account. Once the debt is settled, the creditors will report the account as “Paid as Agreed” or “Paid as Settled” on your credit report.

What are the 6 benefits of a debt reduction program?

Below are few advantages of a debt reduction program:

1. Ultimate relief: A debt reduction program gives you relief from the enormous stress and anxiety that took place due to the debt load.
2. Reduced collection calls: The debt reduction company handles all the payments and collection calls on your behalf.
3. Affordable payments: Your debt payments become more affordable as the balances and interest rates are reduced.
4. Stringent budget: A debt arbitrator will help you create a budget so that you can manage your debt payments and other expenses more efficiently.
5. Timely payment: A debt reduction program helps you pay off your debts in a timely manner.
6. Enhanced money management skills: You learn superior money management skills during the counseling session.

What are the 3 debt reduction strategies you can apply?

Primarily, there are 3 debt reduction strategies that you can do by yourself. These are explained below:

1. Snowball Method: Snowball method is the most popular of all debt reduction strategies. In this method, you pay off the outstanding balances starting with the smallest balances first and just pay the minimum on larger ones. Read below to know how it works:

• Prepare a list of your debt amounts from lowest to the highest.
• Pay the minimum on all your accounts.
• Attack the lowest debt first with extra payments.
• Once you pay off the lowest one, start attacking the next higher balance with extra payments.

2. Credit card balance transfer: Another debt reduction strategy that you can apply yourself is credit card balance transfer. If you are unable to get rid of credit card debt just because of the high interest rate, then you can consider the credit card balance transfer method.

Several credit card companies offer credit card holders to move their balances from a high interest credit card to a low or 0% interest card. You can take out one such card and transfer the balances from high interest credit cards into it. This enables you save money on interests and helps you in credit card debt reduction simultaneously. Pay the balance within the introductory period and live debt free.

3. Debt Avalanche: This is a debt reduction program where you begin paying off the debt having the highest interest rate. The approach is explained below:

• Create a list of your debts from the highest to lowest interest rate.
• Pay the minimum towards each account.
• Attack the debt having the highest interest rate with extra payment.
• Once the debt with highest interest rate is paid off, do the same thing with the next higher rate.

What are the 7 reasons behind consulting a debt reduction attorney?

Some might say it's always better to resolve your debts on your own. However, often some ask to get help from an experienced debt reduction attorney. Just have a look at the following reasons and decide yourself:

1. You can get professional, error free debt reduction guidance from a debt reduction attorney.
2. As an attorney is qualified and often experienced in handling debt negotiation, you can certainly get the best results.
3. If you seek help from a debt reduction attorney, you'll establish an attorney-client relationship. This means your attorney will always work toward your best interest.
4. If you're represented by an attorney, you will be entitled to enjoy the protections made under the Fair Debt Collections Practices Act (FDCPA) to the fullest.
5. Often some credit card companies and their attorneys don't negotiate with an agent of a debt reduction company, but they rather deal with a licensed attorney.
6. Your attorney will always be available to you as a source of legal guidance.
7. Only a qualified attorney can make sure that all the "Payoff Letters" & "Settlement Letters" absolutely reflect the settlement.

It's worth mentioning that debt reduction program is a legal way to reduce and get out of your debts faster. You can even use a debt calculator to figure out the amount you can save through a debt reduction program. If you're not convinced that debt reduction program can solve your problems, then seek help from a debt consolidation or management company.