If you have excessive credit card, or other unsecured debt ( e.g. medical bills, collection accounts, personal loans), then debt negotiation is the fastest method possible of eliminating your debt.
Below is a list of various strategies that are available to pay off your debt:
1. Stop making payments
2. Continue making minimum payments
3. Debt Management (Credit Counseling)
4. Loan or line of credit
5. Debt Negotiation ( A.K.A. Debt Settlement or Debt Elimination)
6. Bankruptcy
Ignoring Your Situation-"You Can Run, But You Can't Hide"
Your first alternative is to simply abandon your debt. What would happen if you did that? Well, in a nutshell, you will start receiving calls from your creditors requesting payment for your delinquency.
Once you become 4-6 months late, your creditors will sell your debt to a debt collector. If you ignore the debt collectors, the collection agency will probably file a lawsuit against you. The courts will order you to pay the unpaid balance, interest, penalties and late fees. This amount accumulates fast, and can cost you $1,000's!
What's worse, these delinquent accounts will remain on your credit report for 7-10 years.
In the long run, ignoring your situation is not the best way to get out of debt. It is by far the most expensive strategy that you may employ.
"Making Minimum Payments Is Like Taking Out An Auto Loan For 33 Years!"
Another option would be to continue making minimum payments. This is the longest method of debt elimination.
Have you considered how long it would take to pay-off $30,000 of credit card debt? O.K., hold your breath..... About 33 years!
Why so long? If you are making minimum payments, almost all of your payment is applied to the interest-not the principal.
Also, the structure of credit card is different than a mortgage or auto loan. The interest for these types of loans is charged only one time per month. On the other hand, credit card interest is calculated daily. Therefore, the interest you pay is about 30 times higher than an auto or home loan!
You wouldn't dare apply for an auto loan for 33 years, would you? However, if you are making minimum payments, then what's the difference?
Joining Forces With The Enemy: Debt Management
Another option would be to enroll in a debt management program. The most familiar debt management program is Consumer Credit Counseling Service (C.C.C.S).
They Give You The Impression That They Are On Your Side
Upon enrolling in a debt management program, a debt counselor will contact your creditors and negotiate a lower interest rate for you. The counselor will also request that all late fees and penalties, if any, be waived. Most of the time the creditors will agree.
To illustrate, if you have $30,000 of unsecured debt, it will take about 8-10 years to eliminate your debt. Not bad. However, that's if you never make a late payment again and if you never use your credit cards.
But whose Side Are They Really On?
It's important to understand that debt management companies are "affiliated" with the credit card companies. In fact, the first debt management company was started by a credit card company. They receive "kick-backs" from your creditors. The higher the debt management company keeps your interest rate, the larger the "kick-back" they get.
We now know where their loyalty lies...
Your creditors don't want you to eliminate your debt; they want you to be buried in debt forever. So, they will usually be content to reduce your rate, but never the principal balance.
In addition, your credit will be negatively affected. Debt management companies will inform the credit bureaus that the debtor is being counseled, and the credit report will state "debtor currently enrolled in consumer credit counseling program", or some other similar phrase.
This terminology may not appear to be negative. But if you think about it, why would someone need debt counseling if their spending habits were in control?
What's worst, debt management programs have an extraordinary high drop-out rate. If you miss just one payment, you will be booted from the program!
About 75% of debtors fall-out of debt management programs! If this happens, not only will their credit be negatively affected, they will be back to where they started.
Primarily due to the extraordinary high drop-out rate, this is not the best way to get out of debt.
Robbing Peter To Pay Paul... The Balance Transfer Game
It's possible to take out a personal or home equity loan to pay-off your debt. Let's take a look at the pros and cons of borrowing to eliminate credit card debt:
PROS:
Only make one monthly payment.
Ability to eliminate your unsecured debt faster than continuing to make minimum payments.
Your loan payments are applied to both the principal and the interest, whereas minimum credit card debt payments are applied almost entirely to the interest.
CONS:
Due to the financial crisis, lenders have made it extremely difficult to qualify for a loan. Only the "cream of the crop" usually qualify.
If the interest on the loan is revolving, then it would defeat the purpose. It would be a lateral move- transferring debt from one account to another.
If the loan is simple interest, meaning that the loan has a pay-off date-like a mortgage or auto loan, you will be able to eliminate your debt faster than a debt management program.
If you take out a home equity line of credit (HELOC) or a 2nd mortgage, and you incur a financial hardship, your mortgage lender may foreclose. Your home is collateral for the lender. In contrast, credit cards are unsecured debt; your creditors have no collateral. Therefore, they cannot repossess any of your assets.
You may find yourself deeper in debt. If you pay-off your credit cards with a loan, you would have an enormous amount of available credit. That is too tempting for most people.
"Perhaps The Worst Decision You Can Possibly Make- Bankruptcy"
Due to the severity of bankruptcy, it's typically a last resort option. The social, psychological, and economic effects can be long lasting.
In the long run, bankruptcy is very expensive. All future loans will have a higher interest rate and a higher down payment. Furthermore, it destroys your credit for 7-10 years.
It's the most severe mark one could possibly have on their credit report. It's even worse than a foreclosure. Why? Because when an individual files bankruptcy, in essence, they are telling future lenders that they gave up paying not only one or two debts, but most, or all of their past loans.
Consequently, it will be much more difficult to qualify for future loans. And if one does qualify, most likely the down payment and the interest rate will be higher.
In addition, the psychological effects can be devastating. Understandingly, many people that file for bankruptcy feel like a failure. They try to move on and forget the past, but it's difficult. So, why walk around with the word "Bankrupt" stamped on your forehead?
Bankruptcy is also public record. Anyone can do an internet search to locate anyone that has filed for bankruptcy.
Worse, one may be required to appear before a judge (and spectators) if they want to file for bankruptcy. I'm sure it's not a comforting experience discussing your personal life standing before a judge and a courtroom full of strangers.
The only potential benefit of bankruptcy is that some or all of your debts may be forgiven by the courts. However, this isn't the case for the majority of people.
Is bankruptcy the best way to get out of debt? Well, if you are experiencing extreme financial difficulties, and can't afford anything close to the minimum monthly payment, then bankruptcy may be the best solution.
Bankruptcy is also public record. Anyone can do an internet search to locate anyone that has filed for bankruptcy.
If this is the case, I urge you to speak to a bankruptcy attorney. Attorneys are the only ones legally allowed to give advice pertaining to bankruptcy.
Debt Negotiation: The Fastest Route To Becoming Debt-Free
What is debt negotiation? It's the process of negotiating with your creditors in order to substantially reduce the balance of your debt. It's critical for anyone in debt to understand the following: drastically reducing your debt-not reducing your interest rate, is the secret to getting out of debt fast.
If your debt load is reduced by 50%, consequently, your monthly payments will be significantly lower. As a result, a debtor will be in a better position to pay-down the principal so that the total debt can be paid-off much faster!
This is why debt negotiation is the best way to get out of debt.
No other program attacks the principal. hey all focus on the interest rate so that they can keep you in debt for a very long time.
Debt negotiation is the best solution for the vast majority of people that have excessive amounts of unsecured debt. The following are the pros and cons of debt elimination.
PROS:
Fastest method of debt elimination-gets rid of your unsecured debt in about 12-48 months
Lowest monthly payment program-lowers your payment up to 60%
Stops or greatly reduces creditor harassment
Make only one monthly payment
May reduce the balance of your unsecured debt as much as 80%
Relieves stress
CONS:
Temporarily affects your credit
Due to the recent surge in demand, there are many unethical and/or inexperienced debt negotiating companies partly due to the fact that a state license is not required in many states.
Debt collectors may file a lawsuit
Although debt elimination negatively affects your credit, it's only temporary. Besides, a good debt negotiating company should offer you a comprehensive credit repair program, which should raise your credit score.
A debt settlement company that looks out for their client's best interest should provide attorney consultation in case a debt collector files a lawsuit against the debtor. Please note that a payment plan can almost always be negotiated in order to avoid a lawsuit.
Debt negotiation is the best way to get out of debt for the vast majority of people that have an excessive amount of debt.
Debt Free Solutions is a debt consulting company located in Long Beach, CA. We have been in business for 10 years. We assist Americans across the U.S. to eliminate excessive credit card and other unsecured debt.
We utilize various programs and strategies to aid them in dissolving their debt in the quickest, safest, and most efficient method possible. We also analyze the risk factor. We structure our programs to drastically minimize the risk that is inevitable with all debt elimination programs.
We offer our clients much more than a debt settlement company does. The vast majority of debt negotiation companies simply settle your debts on your behalf with your creditors- nothing more.
On the other hand, we provide free services to significantly help to minimize the risks that are involved in negotiating with your creditors.
First, we offer a free, no-risk 10 day trial service. During our free trial, we negotiate with your creditors on your behalf to lower your interest rates. Also, we research to see if you have any old debts that you are not legally liable to repay. If, for any reason, you are not completely satisfied, you simply walk away. No commitments. No contracts.
Next, we provide a comprehensive credit repair service to all our clients. This is a $795 service that is absolutely free!
Also, we offer free attorney consultation (a maximum of five sessions) in case one or more of your creditors makes any threats.
Last, we provide a written guarantee that our clients creditors will settle for an average of 50% or more for all of the debts they attempt to negotiate.
Our services are competitively priced- and include the above free services!
Joseph Hernandez
CEO
Debt Free Solutions
www.debtfreesolutions.mobi
(800) 668-8090
Its critical that you choose the
best way to get out of debt. You need to weigh the pros and cons of each program to determine which program is best. Choosing the wrong program may cause a financial disaster!
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