1. Debt Consolidation: This is one of the solutions to credit card debt and other bills. Here creditors agree to cut down the interest rates and eliminate or reduce late payment charges. You need to make a single monthly payment to your consolidation company which then distributes the money to your creditors. Watch out for the 8 debt consolidation benefits.
2. Debt Settlement: With this method, the company helps you to negotiate and reduce your outstanding debt/bills by 40-60%. You'll have to pay a fixed amount each month to your settlement company. The payments accumulate into lump sum cash after months. The lump sum cash is then paid off to your creditors.
3. Debt Management (DMP): This involves a credit counseling session wherein a credit counselor analyzes your finances and debts. The counselor prepares a budget for you so that you can put in more cash towards debt payment. If you are knee deep in debt, the counselor may suggest a DMP wherein he negotiates with your creditors in order to lower the interest rates and cut down late fees.
4. Self Repayment plan: This is a self-help plan using which you can pay off debts on your own. No professional help is taken here. The self repayment plan will be successful if you follow a tight budget on a monthly basis.
5. Bankruptcy: Filing bankruptcy is no doubt one of the debt solutions. But it should be considered as your last resort because it hurts your credit and brings down your score by 200 points or more. Hence it's better to avoid bankruptcy and look for other debt solutions.
6. Slow Pay Method: This method of dealing with debt involves taking no steps to pay off debt. It is based on the concept that you ignore debt and it will vanish. However, it is not advisable to ignore debts because your credit will be ruined if you don't pay. Moreover, your creditors may sue you or the collection agencies may harass you constantly.
Comparison of consumer debt solutions: Will creditor or collection calls stop? Yes. They will communicate with your consolidation company. Yes. All communication will be done via a settlement company. Yes. Debt Management Company will communicate on your behalf. Yes. It is illegal to call you after the filing. Yes.
Will interest rates be lowered? Yes. The company negotiates to lower interest rates. Yes. Not all debts can be included. So, interest payment of those included will be eliminated.
Can I save on principal debt amount? Yes, you'll save 40-60% of the outstanding debt. You'll save in interest when rates are lowered. No. You can save in interest if rates are cut down. Debts are discharged; hence you're no longer personally liable towards the debt.
What are the third party fees? a) One time representation fee to send letters and receive calls from creditor/collection calls. b) Monthly representation fee.
Disclaimer Legal Information Is Not Legal Advice This site provides information about the law designed to help users safely cope with their own legal needs. But legal information is not the same as legal advice -- the application of law to an individual's specific circumstances. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a lawyer if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation.
Consumer Credit Counseling Information, Debt Management Plan Information, Debt Settlement Plan information, Credit Counseling, Credit Score, Consumer Credit Counseling Service, CCCS, Bill Consolidation, Credit Repair, and Debt Consolidation is not advice, and we recommend you consult a licensed credit counseling agency, debt settlement attorney, and/or licensed debt management plan administrator in your state if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation.
