Debt counseling, consolidation, or settlement: Which is beneficial

Debt counseling, consolidation, or settlement: Which is beneficial?

The two most feasible options for people struggling to pay off debts are debt counseling and debt consolidation. But most people feel overwhelmed when they need to choose between these two options. It is worth mentioning that each method has its advantages and disadvantages. So before you select a suitable debt relief program, it is advisable to analyze your financial situation as well as check the two options properly. Therefore, let us discuss these two options in detail to know which one will be favorable for your financial situation.

 

Credit counseling/debt counseling

What is credit counseling?

Credit counseling is a process where a credit counselor educates the debtor about various debt relief options, money management techniques, and budgeting. This process also provides guidance to debtors to eliminate debt.

The credit counseling agency assists the indebted people to get out of debt. The firm guides the debtor to manage the financial situation effectively.

 

What is the function of credit counseling?

A certified credit counselor guides the debt-stricken consumers to get out of debt.

When you opt for credit counseling, the credit counselor will formulate a budget plan after reviewing your financial situation so that you can manage your finances. He will design a repayment plan to make the owed amount affordable to pay off.

 

Effect of credit counseling on credit score

Your credit counseling session will not bring down your credit score as the effect of this program will be negligible on your credit score. The credit counselors prevent consumers from applying for new credit cards and incur fresh debt. They also prevent consumers from using a credit card in the wrong way, which can hurt the FICO score in the future.

 

Debt consolidation

What is debt consolidation?

Debt consolidation is a process of merging your multiple debts with a consolidation loan at a favorable interest rate. You can prolong your repayment plan, which will help to lower your monthly payment.

 

How can you consolidate your debts?

You can take out an unsecured consolidation loan from a bank to combine your debts. If your credit score is low, then you might not be able to get the loan on the affordable interest rate.

 

Try to opt for a secured debt consolidation loan if you are looking for low-interest loans. You can take out a loan against a security deposit on favorable terms. But, keep in mind that, if you default on your payment, then you might lose possession over your assets.

 

You can even hire services of a debt consolidation company if you are unable to manage your debts. This company can help you to get a consolidation loan at an affordable interest rate. You need to find a reputable debt consolidation company with Better Business Bureau accreditation.

 

There is yet another way to consolidate your debts, and that is by enrolling in a debt consolidation program. Here the debt counselor associated with the company will negotiate with the creditors to lower the interest rate on the principal balance. He might instruct you to skip payments so that the creditors agree to lower the repayment plan. When you skip payments, your credit score might drop initially. But once you start making payments, it will eventually increase.

 

Debt settlement

What is debt settlement and what is its effect?

If you can’t manage your multiple debts due to lack of income and the debt collectors are giving you harassing calls throughout the day, you can enroll yourself in a debt settlement plan and repay the reduced balance with ease. While there are professional companies that you can resort to, you can also take certain steps on your own. By settling your debts yourself, you can save your dollars on the unnecessary fees charged by the debt settlement attorney.

 

3 Steps to settle your debts

  • Know your lenders: You can settle your payday loan debts through settlement. If you have a dozen payday loans or a couple of them, calculate the total amount before considering further steps. Calculate the principal amount and the interest rates on each account. This will help you to understand how much you need to repay your creditors.

 

  • Know the licensing laws in the state: You should check the licensing laws so that you can understand whether you owe them both the interest rate and the outstanding balance or just the principal amount. If the lenders are legal in your state, then repay the entire amount. If the lenders are not legal, then you just need to pay back the principal amount and not the fees.

 

  • Negotiate with your lenders: To settle your debts, you need to negotiate with your creditors to reduce the total debt amount. However, negotiation can be difficult for you since you have to convince your creditors about your financial difficulties. Thus, you can enroll in a debt settlement program, when the negotiator negotiates on your behalf and successfully reduce the total debt amount.

 

Therefore, analyze your financial situation before selecting a debt relief plan as it will help you attain financial liberation. Make sure you exercise financial discipline when you take out a debt consolidation loan otherwise you might get further into debt. If you are looking for a fast debt relief solution, then credit counseling will not be a good option for you.

How You Can Get Rid Of Debt Before Christmas - 4 Tips

How You Can Get Rid Of Debt Before Christmas – 4 Tips

Although it may look like an impossible task to get out of debt before Christmas, but it isn’t so actually especially when you owe less than $10,000 to creditors. If you read this post and follow the tips mentioned here, then I’m sure you’ll be able to enjoy delicious foods and friendly banters with family without any debt problems or stress. So without wasting any time or words, here’s how to have a debt-free Christmas.

1. Take up a second job:

The thought of doing a second job after a tiring day might not be appealing to you but it can fetch you a good amount of money. Instead of watching Netflix in the evening, you can use that time to make money. Simple jobs like pizza delivery and writing articles can help you to get extra cash. Use it to pay off your debts. Focus on those jobs that give you a minimum of $200 – $400 per week.

2. Give a garage sale:

Take an inventory of what you have and throw a garage sale. I’m not saying that you should sell everything. What I’m suggesting is, sell the items that you don’t need. Try to pick up those items that have decent value in the market. Otherwise, you won’t be able to make a big amount of money. You can also choose items that you can’t sell on eBay due to shipping problems.

3. Settle your credit cards:

One of the fastest ways to get out of debt before Christmas is to settle credit cards since that allows you to pay less than what you owe. But for that, you need to save money first.

Create a budget to see how much you earn and how much you keep in your bank account. Thereafter, think about the ways to reduce your expenses so that you can keep more money in your bank account. You can use this money to settle your credit cards since creditors would expect a lump sum payment. See also: Is it possible to settle debt without hurting your credit score?

4. Opt for a balance transfer card:

A balance transfer card can help to reduce your debt load instantly. You can take out a 0% interest balance transfer card and pay off your outstanding balance on other cards instantly. Thereafter, pay off the new debt at a low-interest rate in the next 12 months. Check out – How to do the best credit card balance transfer to avoid mistakes!

What else you can do

Thousands of people are getting into debt at Christmas. Last night, when I was writing this article, I decided to check how many people go in debt for Christmas on Google. The results startled me. Nearly, 74% of Americans couldn’t budget properly for the festive season and incurred an average of $1054 of debt in 2017. As per the financial experts, if consumers make only the minimum monthly payment, then they won’t be debt-free before 2023. Adding fuel to the fire, consumers would end up paying $500 interest during the tenure.

It’s high time to stop going into debt for Christmas because that affects the overall financial planning in the next year. Remember, recession can hit the country at any time. So you should start taking steps to build a recession-proof financial life now on. And, the first step is to get out of debt before Xmas.

Do you feel that what I said is wrong from any angle? If so, then feel free to post your feedback in the comment section.

Have any ideas on how to pay off debt before Christmas? Share them with us too.

Posted in how