Debt Settlement Programs vs. Debt Counseling Programs

For many people, even those who are not currently in serious debt, the thought of not being financially stable is nearly debilitating. Along with putting a dampening mood on your outlook for the future, it also just seems confusing with so many debt relief options available. Many people get stuck between two popular options — debt settlement vs debt counseling. Both have their list of benefits for different people, and Liberty Debt Relief wants to make sure that you pick the choice that is right for your situation. Find out if you should choose debt settlement or debt counseling below.

Debt Counseling

It is easy to see why people want as much guidance as possible when it comes to handling their finances. Between understanding the various interest rates and fees, understanding how to work with multiple lenders simultaneously, and knowing how to effectively manage your income and expenses, it can be extremely stressful, especially if your experience is limited. Debt counseling is a good choice if you believe that you need some additional advice. Program counselors will help you outline exactly what you can implement in your life to try and help you stay out of debt for the long haul.

With a debt counseling program, you can receive specific information regarding your budget so that you can not only address your current financial situation but also plan for the future. Under this program, also known as a debt management plan, you can also seek consolidated loans or other forms of debt relief.

Working with this instead of a debt settlement program, however, is essentially working within an educational seminar. Many credit counseling companies are nonprofits that provide free information regarding getting out of debt but do not actually take any active steps to help you eliminate the debt you are concerned about. Rather than working on your behalf to settle accounts you owe money to, reduce interest rates and fees, or consolidate multiple debts, they simply teach you daily, weekly and monthly tasks that can help prevent debt in the future.

Debt Settlement

While some people prefer more structured guidance with debt counseling, the truth is that debt settlement programs are often the most cost-effective and helpful option. At the end of the day, debt counseling puts the actual process of short term debt relief completely in the hands of the customer. Debt settlement, on the other hand, allows you to adopt a solution that works in the long term while also inadvertently teaching you how to better manage your finances in the future.

The beauty of debt settlement is also that you can actually lower the amount of unsecured debt you owe, which is usually the most pressing part of any debt relief program. With debt settlement, a debt relief consultant with years of experience will work with you one on one to come up with a plan that you can afford and that actually benefits you financially for the years to come. After meeting with you to understand the state of your finances, they will allow you to take a step back from the debt relief process and work on your behalf to contact lenders and banks.

Debt counseling specialists, however, do not negotiate a lower overall payment amount with your lenders. At most, they will convince your lenders to extend your repayment period. While this may not lower your monthly payment, it adds more money to your total debt. If they extend your repayment period from three years to five years, for example, you have an additional 24 months of compounded interest on your loan, which can actually be several more thousands in debt. Essentially, if you are looking to actively reduce your current outstanding balances, debt settlement may be the best choice vs debt counseling.

Take Action Now

Implementing healthy financial tasks into your everyday life is a great way to create a secure a sustainable future for you and your family. While this sustainability is crucial, there is no way to prevent debt if you are already buried within it. When it comes to choosing debt settlement vs debt counseling, the best thing you can do if you are struggling financially is to get started with a settlement program. Liberty Debt Relief will not only help you lower your outstanding balance, waive fees, and reduce your interest rate, but will make sure that you can restart your financial well-being with the essential skills for success. Call us today to find out how you can abolish your existing debts with a debt settlement program and get started on your way to a successful future of wealth, health, and happiness.

Debt Management Vs. Debt Consolidation: Which One Is Best For Me?

Getting into debt is easy, but getting out of debt usually takes more effort. If you find yourself in a situation where you need a debt management solution, you will need to do some research to find out how to make the best plan of financial attack. While there are dozens of options available, many people narrow it down to only two, debt management and debt consolidation. By understanding the differences between these two options, Liberty Debt Relief can help you figure out what is the best debt relief option for your needs.

The Ins And Outs of Debt Management

The constant bombardment of credit card offers can be difficult to avoid and turn down, which is why millions of people end up in excessive credit card debt. For those who end up with multiple cards and seemingly endless repayments, a debt management plan may work for their situation.

Under this plan, borrowers can compile all of their credit card debts into a single sum that they make payments on every month. A plan usually takes up to five years and can eliminate a lot of the stress that accompanies being largely indebted to multiple companies. If you choose to work with an accredited debt relief company, the person you work with can oftentimes negotiate a lower amount owed on your individual accounts, have late and other types of fees waived, and can even lower the interest on the new debt account, saving you money in the long term.

To qualify for a debt management plan, you must be looking to rectify credit card debt, as this debt management solution cannot be used for private student loans, medical bills, utility bills, mortgages or other types of loans. Generally, using a debt management plan requires compiling unsecured collateral. There are really no other overall requirements for debt management plans, although borrowers considering one should note that it is crucial to make all debt management plan payments on time every month.

Contrary to what many believe, investing in this debt management solution also does temporarily lower your credit score. It is to be expected that your financial advisor will instruct you to stop using your credit cards and to not open any new accounts while you are committed to your debt management plan. This lack of revolving utilization will dampen your score throughout the plan’s duration, but in the end, you will be mostly, or completely in some cases, out of debt. Once the plan is over, you will be able to use your credit cards once again, and your score should be higher and safer in a short amount of time.

Deconstructing Debt Consolidation

Staying on top of dozens of bills, loan repayments, credit cards, and other types of debt can be very difficult to do. Sticking to repayment schedules is similar to time management and scheduling, and if either of those is something you struggle with, debt consolidation may be a good debt management solution to look into. What makes it one of the best debt relief options for so many people is that you can convert your multiple high-interest accounts into a single, low-interest account that has one due date every month, versus three or more.

When you work with a debt relief company to configure your debt consolidation, you will likely be faced with two options: One, to complete a balance transfer and put all of your outstanding debts onto a credit card; or two, get a loan to pay off all of your debts and then make payments only to the loan. With either of these options, you will have significantly lower interest and fees, but terms and conditions for these options will differ depending on your financial and credit situation.

Qualifying for this debt management solution is not necessarily difficult, but those who have good enough credit to qualify for a lower interest rate will benefit the most. For example, if you have a credit score of less than 650, you likely will not qualify for a loan or credit card that has an interest rate significantly lower than what you already have. If, however, you have a credit score of 700 or higher, you may be eligible for a credit card or loan with a lower rate, which could save you thousands of dollars in interest charges. Similar to debt management plans, it is also crucial to make sure you will be able to make your consolidation payments every month.

How to Choose Your Debt Management Solution

Knowing the differences between a debt management plan and debt consolidation is only one of the steps necessary in making the best decision for you. Look at how many credit accounts you have, the amount you owe for each, your interest rates, how often you are able to make the payments, what the minimum payments are, and all the other little details surrounding the accounts individually and as a whole. This is a lot of information to sift through, and if it seems like a little too much to come up with the right decision, Liberty Debt Relief is always available to help. Contact us today and we will get started on eliminating your debts and giving you the credit and future you deserve.