How debt relief program works and affects credit score

When you need help with debt relief, you must choose the right program. Otherwise, your problem won't be solved. Here are a few ways to do it:

• Ask the debt relief company about the most important features of the program.
• Find out if they have certified debt consultants.
• Check if the Better Business Bureau accredits them.
• If you are working with a debt settlement company, ask them if they will open an FDIC-insured bank savings account.
• Irrespective of your chosen program, check if the debt settlement company, debt management company, or credit counseling agency follows all applicable laws.
• Check out the top debt relief reviews online before deciding.

It depends on the program you're choosing. If you opt for debt settlement, your credit score may drop since you're paying less than the full amount. But you can always rebuild your credit. Debt consolidation or management helps to improve your credit score gradually. Honestly speaking, it's all about the utilization ratio.

Your credit score will increase if debt relief services help lower your overall utilization ratio (balance-to-limit ratio). Suppose your overall utilization ratio drops from 90% to 20% after settling or consolidating credit cards. In this case, your credit score will improve.

Make sure you don't close your credit card accounts since that would negatively affect your utilization ratio. If you have a high utilization ratio on one card, you can counterbalance it by having a low overall utilization rate.

The IRS considers money saved through debt forgiveness as taxable income. You have to pay tax if the creditor forgives more than $600. Suppose you accrued a credit card debt of $20,000. You didn't pay any tax on that amount since that was not your income.

You used the money to fulfill your needs but didn't repay your creditor. Later, you enrolled in a debt settlement program to reduce the total amount you owed. If the creditor agrees to reduce your payoff amount to $11,000, you have to pay tax since the IRS will consider $9000 as your income.

You must pay a success fee of 25% on the total enrolled debt after it has been negotiated successfully or paid off.

Please note: The fee structure varies from company to company. OVLG charges a nominal fee for managing your debts. Some fraudulent debt relief companies don't follow the FTC rules and charge an advance fee without doing anything.

1. Are you accredited or certified?
2. How do you plan to give me relief from credit card debt?
3. How much do you charge for your debt relief consultation?
4. When can I expect to be debt-free?
5. Do you follow all the rules?
6. Do you offer free budget counseling?
7. How can I monitor the progress of my case?
8. What happens if I leave the program midway?

Like the IRS, the federal government has many repayment plans for distressed borrowers. Some of them are:

1. Federal Student Loan Consolidation
2. Permanent Disability Discharge
3. Public Service Loan Forgiveness
4. Income-Driven Repayment Plans
5. Teacher Loan Forgiveness
6. Perkins Loan Cancellation
7. Death Discharge
8. Closed School Discharge

You can join hardship programs - Usually, banks offer these programs when existing account holders fall behind in their payments due to financial hardship like job loss or prolonged illness. These programs create a repayment plan according to the affordability of account holders. So it becomes easier for them to make payments.

Usually, it lasts for six months to 1 year. Sometimes it can stay permanently until the balance is paid off.

You can take out a debt consolidation loan - Usually, banks, peer-to-peer lenders, and financial institutions offer this loan. Consumers can repay their debts with this new loan at a lower interest rate and start making payments. This helps to save money.

You can apply for a balance transfer credit card - Consumers can transfer the outstanding balance on a high-interest credit card to a balance transfer card with 0% APR for the first 12 to 18 months. They would save the entire interest if they could pay off the balance within the introductory period.

Banks do provide loans for consolidating debt, but not under that term. Banks offer loans that can be used for debt consolidation and other transactions instead of just offering loans for that purpose. Apart from that, you can obtain a loan from peer-to-peer lenders.

A debt management plan helps you pay off high-interest, unsecured debt, mostly from credit cards, without taking out a personal loan. Debt management plans lower interest rates on credit cards to about 8% and makes monthly payment affordable so people can pay off their debt in 3–5 years.

Credit counseling agencies usually offer this debt solution. A certified credit counselor provides the plans. They look at your income and expenses in detail to make a household budget that includes a fixed monthly payment that fits your budget. Credit card companies are told about the plan, and they must agree to it.

According to the debt management plan, people make payments to credit counselors, who use the money to pay off their debts. The amount you pay each month is based on what you can afford. Once approved, a debt management plan makes it easier for people who use three or four credit cards and three or four minimum payments to remember each month. The credit counselor replaces multiple loan payments with a simple personalized plan.

Several non-profit organizations can help with debt relief and discover various ways to save money without charging fees. Some non-profit credit counseling organizations charge a nominal fee for offering solutions best suited to your financial situation.

Before working with a non-profit organization, check if they have the mandatory 501(c)(3) certificate. There are instances where fake non-profit companies have scammed consumers. Scammers open fake non-profit companies to lure consumers with the promise of 'free debt relief services.' Once consumers join the program and disclose their confidential financial information, scammers stop all communication. They use all the financial details for their profit.

Can you get debt relief help without paying any fee?

Several non-profit organizations can help with debt relief and discover various ways to save money without charging fees. Some non-profit credit counseling organizations charge a nominal fee for offering solutions best suited to your financial situation.

Before working with a non-profit organization, check if they have the mandatory 501(c)(3) certificate. There are instances where fake non-profit companies have scammed consumers. Scammers open fake non-profit companies to lure consumers with the promise of 'free debt relief services.' Once consumers join the program and disclose their confidential financial information, scammers stop all communication. They use all the financial details for their profit.

Debt settlement companies help you settle your debt for a small percentage of what you owe your creditors. A debt settlement company offers prompt debt relief solutions to people who can't make a monthly payment on credit card debt.

Using debt settlement services is a good idea for consumers who need more negotiation skills and are unaware of industry protocols. Debt settlement companies have attorneys/debt experts in negotiating with creditors and making your debt payments simpler. They know how debt relief work in the country and will do their utmost to protect your money. Apart from tackling multiple debts, they can also help you avoid scams.

There are neither income criteria nor minimum credit scores. You can qualify for the professional debt settlement program if your debts meet the requirements and you save the required amount in a trust account.

In addition, OVLG provides a money-back guarantee so you may join with confidence. You may learn more about the debt settlement program by completing the online form for a free consultation with OVLG or starting immediately.

Why should you choose our law firm over others?

1. We have a team of debt relief attorneys with excellent negotiation skills.
2. They know all the debt relief laws and protect you against financial abuse.
3. We have a No Questions Asked Refund Policy.
4. We charge affordable fees.
5. You can track your case 24/7.