Everyone has different kinds of debt they have accrued over the years, which means everyone needs a debt solution that caters to their particular situation. When it comes to deciding between various relief options, the answer depends on many factors. Luckily, Liberty Debt Relief has experience working with individuals in all kinds of financial situations, and we have found certain debt relief strategies may be more appropriate for certain people.
Debt Management vs Debt Settlement
In most debt settlement programs, a debt settlement consultant will negotiate with your lenders to settle for a lower amount — usually between 30 and 50 percent less than your original outstanding balance. Debt management plans, on the other hand, combine various debts from different lenders into a single balance with a lower interest rate that you then work to pay off over time. You will not necessarily have a significantly lower amount that you owe per account, but you will save hundreds or even thousands of dollars in interest as you pay the borrowed amount back.
If You Have Mostly Credit Card Debt
Creating a debt management plan may be one of the best debt relief strategies you can choose if you are primarily dealing with credit card debt or other forms of unsecured debt, such as medical expenses. Credit cards tend to have slightly higher interest rates and are usually easier to manage in longer-term repayment plans. While you will not be able to continue using your credit cards during the repayment period, you will be able to combine all of your credit card balances into one with a significantly lower interest rate, which can save you a lot of money over time. If you get some help from an experienced debt solution expert, they will also work to get any fees associated with the debts waived.
Of course, if you choose to settle your credit card debt instead, you could end up saving tons of money! There is a chance your debt consultant could negotiate certain accounts so you end up paying less than you currently owe, which is not something management programs can do for you.
If You Have Delinquent Debt
Delinquent debt is a major issue that can have severe, long-lasting impacts if solutions are not established as soon as possible by you and your lender. If you have not paid anything towards your balances in at least six months and have made no efforts to fix the situation with your creditor, then you will receive this delinquent status, which can result in severe negative impacts on you and your co-signers’ credit profiles. For those who have ended up in this situation, the best thing to do is to seek out a settlement option, as you are likely too far in the financial hole to establish a debt management plan with your lender you will be able to afford.
By choosing settlement as your debt solution, your lenders and your consultant will discuss what you can actually afford to pay without risking more delinquent charges, so that you can pay back the balance as soon as possible. In fact, this may provide some leverage during negotiations because creditors will be happy to collect a lesser amount rather than nothing.
If You Don’t Qualify for Debt Consolidation
Some people will not qualify for debt consolidation because they do not have the credit score or income necessary to secure a new consolidation loan that will lower their other debts. With debt management, that problem could be eliminated.
Once you set up a debt management plan, you will still be able to make monthly payments towards your outstanding balances. The payments will automatically be deducted from your bank account every month and late fees will be waived so that you are able to stay on top of your debt and save some money in the process.
Again, debt settlement may also be an option for those who don’t qualify. In fact, this debt solution is the most affordable because you are not required to take out yet another loan. You do pay fees to the debt settlement company for their services, but these are only charged after the services are complete. You should never be charged upfront by a debt settlement company.
If You Are on the Brink of Filing for Bankruptcy
Bankruptcy should always be a last resort, but if it comes to the point where you are strongly considering filing for it, it is far better to choose debt settlement vs debt management as part of your financial strategy. If you go through with filing for bankruptcy, not only will you take a hit for finances, so will your lenders. They will not get the money you owe them, which is why they want to do everything they can to make sure they get paid as soon as possible.
Instead of filing for bankruptcy as soon as you get the chance, talk to your creditors about your situation. They will more than likely negotiate a significantly smaller debt amount that you will actually be able to pay. If you are able to settle to an amount that better works for you, you may even be able to forego bankruptcy altogether, saving your credit and your assets.
Talk to a Specialist to Find the Optimal Debt Solution
Debt relief strategies come in all shapes and sizes to fit every person’s individual needs. To better understand whether debt settlement or debt management is better for you, the best thing to do is speak to a debt relief consultant. They will sit down with you one on one to look over your budget, analyze how much debt you need to pay, and point you in the right direction of the solution that will get you out of debt as soon as possible.
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