As the recent recession lags on, consumers are finding it harder to make ends meet, and many may have had to take on additional debt through credit cards and personal loans. In doing so, some have seen their monthly payment obligations grow quickly out of their control and have found themselves ina very difficult financial position.
For those that would like to explore alternative debt resolution options to bankruptcy, there are fortunately several possibilities, each with their benefits and drawbacks.
Consumer credit counseling (CCC) is a debt resolution program for those who are unable to make their minimum payments and are undergoing financial difficulties. However, CCC programs could take up to 6 years or longer to complete and they require an individual to pay back the full principal balance of the debt that is owed, albeit at a lower interest rate. Consumer Credit Counseling Services, on average, have very high rates of client cancellation, as clients often find that the payment relief is not enough to facilitate their hardship. With that being said, a CCC program may be a viable option for those with under $15,000 in unsecured debt, or those that are able to afford higher monthly payment obligations and are well disciplined to remain in the program.
Debt consolidation loans can be a great debt resolution option for those that can qualify for a good one. This option typically requires an above average or good credit rating and considerable equity in your home. If you have a very large debt balance and have been late on just one monthly payment, it is likely that your credit may be impaired. Also with this option, one does not realize any reduction in their principal balance. Individual debt accounts are just being rolled up and paid off through a new loan, often one that is secured by a home or other asset. While a debt consolidation loan coupled with a debt resolution program provides a very powerful solution, remember that debt consolidation alone does not reduce or settle your debt; it only shifts your debt from one place to another.
One of the fastest debt resolution options is called debt negotiation, which aims to settle your debt for less than the original balances owed. Debt settlement programs typically can settle unsecured debt for between 40% and 60% of the balances owed, and they also may enable you to become debt-free from your enrolled accounts in as little as 24 – 36 months. For example, through a debt settlement program, if you owe $30,000 to your creditors, you may be able to reduce your debts by $15,000 or more. While this enables a consumer to save a lot of money, there are also some challenges that clients typically face as well. Consumers will experience heightened collection calls, a negative impact to their credit rating, and risk the possibility of being sued, for example. While it is possible for an individual to pursue this debt resolution strategy on their own, there are many companies that professionally offer this service and can be very effective in achieving positive results.
Whichever debt resolution option a consumer chooses to pursue, they should be aware that there are risks involved and do their homework on the company that is providing the service. While no debt resolution process is going to be easy, there are good companies offering successful solutions that are worthwhile and have lasting benefits.