Find out which debt relief program is best for you

Answer a few questions in a minute and we will tell you about the debt relief program that is best suitable for your current financial scenario. Remember, the right debt relief program will help you reduce your existing problems and make your financial life better. On the other hand, wrong debt relief program will only complicate your life.

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Do you want to get rid of late fees?

Late fees: This is the extra fee you need to pay for not paying a bill on time. Late fees affect your credit score badly. They stay on your credit report for 7 years.

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What is a debt relief program?

A debt relief program helps you pay back your creditors and attain financial freedom. These programs give you advice on dealing with multiple bills and create a repayment plan as per your affordability.

Check out the 6 debt relief programs that can help you get rid of multiple bills.

  1. Credit counseling: It helps you repay multiple bills with money management techniques and budgeting.
  2. Debt settlement: It helps you pay less than what you owe on your outstanding balance.
  3. Debt consolidation program: It helps you club your multiple bills into a single monthly payment plan.
  4. Debt consolidation loan: It helps you pay off your debts with a new loan at a low-interest rate.
  5. Debt management: It creates a smart repayment plan and helps you lower interest rates on your existing debts.
  6. Bankruptcy: It helps you discharge your unsecured debts in 3-4 months. The court sells the non-exempt assets and gives you the repayment plan.

How do debt relief programs work?

Debt relief programs work on 2 simple principles. Either they would cut down interest rates on your existing debts (as it happens in debt consolidation or debt management) or they would lower your outstanding balance (as it happens in debt settlement). But the goal is same.

The goal of all types of debt relief programs is to help you save thousands of dollars within a short period of time.

Usually, a debt relief program gives you a date when you'll attain financial freedom. In Chapter 7 bankruptcy, you can expect to get rid of debt in 3-4 months. In Chapter 13 bankruptcy, you'll need 3-5 years to pay off your debts.

Perhaps, the fastest way to relieve your debts is to enroll in a debt settlement program. This program can help you pay off your credit cards in just 3-4 months. Of course, this depends on the amount of debt you have, the willingness of the creditor to settle, and the negotiation skill of the debt negotiator. Otherwise, it may take between 2 years and 4 years to knock off debts.

A debt management program or a debt consolidation program again stretches from 2 years to 5 years since you're paying off the entire amount.

How do credit card debt relief programs affect your score?

Debt relief programs are designed to improve a person's overall financial health. They help people to fix their serious financial issues and increase credit score gradually.

Usually, the impact of credit card debt relief programs over credit score depends on the following factors:

  • Debtor's behavior or activities outside the debt relief program
  • The type of debt relief program chosen
  • The financial situation of the debtor before joining the credit card debt relief programs

Example:

Financial activities of the debtor

If an individual accumulates new debts, then his credit score will drop due to high debt-to-income ratio.

Type of credit card debt relief programs

If you choose bankruptcy, you're likely to lose more than 200 points straightway. However, if you choose settlement, you're likely to lose only a few points.

The good news is once your debt is paid off, your debt-to-income ratio improves. This helps to increase your score.

Financial situation of the debtor

If your credit score was bad at the time of enrolling in a debt settlement program, then the effect on your credit score would be minimal. However, there can be a big drop in your score if you had stellar credit before joining the credit card debt relief program.


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