GOODBYE JONES
Financial Tips For A Better Future
PERSONAL FINANCE | DEBT RELIEF | ARE DEBT RELIEF PROGRAMS THE BEST WAY TO GET OUT OF DEBT?
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Are Debt Relief Programs the Best Way to Get Out of Debt?
If you want to save money and be debt free within 24-48 months, a debt relief program might be the perfect solution for you.
But be careful, not all debt relief programs are created equal.
With millions of Americans now dealing with rising prices, gas in some states reaching over $7 per gallon, and the cost of living going through the roof, many people are going deeper into debt to make ends meet.
The stress, sleepless nights, tension with loved ones, skipping payments to pay off crucial bills, and for many, a sense of hopelessness are leaving them wondering what options they have to get their financial lives back.
Veteran credit expert Gerri Detweiler, the co-author of the e-Book, Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, in a recent interview said that “debt settlement can save consumers money by allowing them to resolve their debts for less than the full balance. It can be a way out of debt for some individuals who can’t afford to pay back the full amount they owe.”1
Well, that all sounds nice on the surface.
But is this really the best way to become debt-free? Will you actually save money and be able to become debt-free?
By the end of this article, you will have a better idea if a debt relief program is right for you.
This article will answer the following three questions so you can be empowered to make a more informed decision:
▷ How much money can I save with a debt relief program?
▷ What options are available besides debt relief programs?
▷ How do I know if a debt relief program is right for me?
Let’s dive and begin to tackle these questions one step at a time.
How Much Money Can I Save With a Debt Relief Program?
The American Fair Credit Council (AFCC), the industry association for debt relief companies, recently shared a study where they found the following2 :
– Debt relief programs, on average, provided $2.64 in savings for each $1.00 in fees a client would end up spending
– 98% of settlements resulted in a decrease in the client’s debt even with any fees that were included
– The longer a client participated in a debt settlement program, the more savings they would see, on average.
Given the role of the AFCC to hold standards for debt relief companies, it’s a safe bet that they have access to more quality information as all the companies that are associated with the AFCC have to be in good standing in order to be associated with them.
So what does that mean for you?
Let’s say you have a total debt amount of $20,000. You’re in way over your head, barely being able to keep up with your minimum payments, and that debt amount is never going to go down and you know it.
So you decide to hire a debt relief company to help you.
The average fees that a debt relief company will charge can range anywhere from 20-25%. What is important to know is that by law, the company can’t charge this fee until it has settled your debt, so you don’t have to worry about forking over all that money to get started.
Ok, so that’s good news. But that’s still a pretty hefty amount!
So if your fee is 20%, and the total debt you owe is $20,000, that’s a whopping $4,000 in fees (that’s calculated as 20% multiplied by, in this scenario, the total debt amount of $20,000).
But based on the average of what the AFCC found, you would save $10,560 by hiring them (that’s $2.64 multiplied by the $4,000 you would spend in fees)
That’s pretty good, right?
A lot of people are afraid whenever they hear the word “fees” because when you’re already in so much debt, the last thing you are thinking about is paying more for anything.
But in this case, if you were to sign up for a debt relief program, even after the company takes their fees, you would be way better off, and most importantly, have the peace of mind knowing that you no longer have to worry about your debt ever again.
What Options Are Available Besides Debt Relief Programs?
The most common options available besides debt relief programs are:
1) Negotiating with creditors by yourself
2) Hiring a lawyer to file for bankruptcy
3) Hiring a credit counseling agency
Let’s look at these options more closely and compare them to going with a debt relief program.
1) Negotiating with creditors by yourself
If you are up to the task, you can contact your creditors and try to negotiate with them.
Sometimes your creditors might be able to help you lower your monthly payments or even settle your debt for a lower amount, but it’s going to really boil down to how comfortable you are with doing this and setting aside the time to make it happen.
In order to be successful, you need to get your ducks in a row and have the following ready before you make your first phone call:
– A list of all your total current debt (credit cards, loans, etc.) so you know exactly how much you owe and what’s outstanding
– Deciding what order you want to call your creditors, getting their phone numbers, and building a schedule so you can commit to it
– Blocking time out of your day each week so you can call your creditors and set up follow-up times to chat with them. You can expect to be talking to them multiple times as they will need time to look at your file and see what they can do
If you don’t feel comfortable with this, your best bet is to always find a professional you trust to help you. A professional is trained to know the ins and outs of the business, and it’s their job to help you negotiate the best deal for you (because by helping you, they also make money in the process). You’re hiring them to get the job done, so you can focus on the other areas of life that need your attention.
2) Hiring a lawyer to file for bankruptcy
Bankruptcy is typically a faster option, taking roughly three to six months to complete, whereas a debt relief program can take anywhere from twenty-four to forty-eight months (or even longer, in some cases) to complete.
Keep in mind that bankruptcy is a legal process, so if you do have any assets like homes and cars, they might have to be liquidated and sold off in order to pay off your debt. Certain assets like household and personal possessions, retirement accounts, and a car might be exempt from a bankruptcy filing, but that does vary from state to state so it really depends on where you live.
When looking at bankruptcy, one major difference is that you will need to be able to afford the fees for your lawyer, which can range anywhere between $1,200 – $3,000, depending on the firm you hire and again where you live. With a debt relief program, there are no upfront fees, as the fees can only be charged by law after your debt has been settled.
A lot of people find it tough to qualify for bankruptcy protection due to the hefty upfront fees, whereas debt relief programs are available to anyone who is going through financial hardship and is finding it tough to pay down their debt. On a final note, be aware that if you do go file for bankruptcy, it will remain on your credit report for ten years.
3) Hiring a credit counseling agency
And finally, the last option that’s worth considering is hiring a credit counseling agency.
Isn’t this the same as a debt relief agency? No, not exactly.
A credit counseling agency is typically a free or a low-fee service provided by non-profit organizations. They are often funded by credit card companies, and the goal of a credit counseling agency is to get you into a debt management plan, where you might receive a reduced interest rate and a waiver of any penalty fees that you might be owing.
Though they can be extremely helpful due to the low upfront costs, they might not be the solution if you are looking to pay off your debts faster, or in the case where you might not be able to afford the required monthly payments. There are also scenarios where you might not even qualify for reduced interest rates, even if you are going through major financial hardship so that is something to consider when exploring your options.
If your goal is to pay off your debts faster, this option might not be your best bet, as you would be able to pay off your debts much faster with a debt relief program.
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” Debt settlement can save consumers money by allowing them to resolve their debts for less than the full balance. It can be a way out of debt for some individuals who can’t afford to pay back the full amount they owe.“
– Gerri Detweiler author of Debt Collection Answers:
How to Use Debt Collection Laws to Protect Your Rights
How Do I Know if a Debt Relief Program Is Right for Me?
If you are in a situation where you are scraping by just to make your monthly payments and you are not making any progress on lowering your debt, then exploring a debt relief program would be a great option for you.
The comfort of having a professional help you negotiate with creditors, saving you more money in the end, and having peace of mind by reducing your stress levels are all positive steps toward reaching your financial dreams.
If you are looking to grab a free debt relief consultation with a debt relief expert, we would highly recommend you click the link below and complete a quiz with Debt Debbie.
Debt Debbie is a company that we have found to not only provide great financial education for people in need of debt relief, but they have helped thousands of people obtain free advice from debt relief experts that can help them manage their debt and only work with some of America’s very best debt relief experts.
It’s so important to get quality advice nowadays and to be connected with someone who you can trust to guide you through your financial difficulties.
By taking this 25-second quiz you will be able to get direct feedback if you’re eligible for a free consultation, and from there, you will be speaking directly with a debt expert that Debt Debbie will connect you with so you can take the right step towards changing your financial future.
Final thoughts to consider:
– Debt relief programs, on average, have provided $2.64 in savings for each $1.00 in fees you might end up spending
– By law, debt relief companies are not allowed to charge you any fees associated until they have completely settled your debt
– Get empowered by talking to a debt advisor so you can assess your options and determine what is right for you
– There are different options you can approach to tackling your debt: negotiating with creditors yourself, bankruptcy, credit counseling, or dealing with a debt relief company to manage this for you. Take the time to assess what path makes sense for you and ensure that you are building a strong relationship with the advisor that you end up deciding to hire.
GOODBYE JONES
Financial Tips For A Better Future
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