There are a more than a handful of solutions which can be used to get rid of debt. Choosing the appropriate one can be a difficult task as most of the time you really do not know which is the best one, or which one suits you the best. Hence, it is extremely important to grasp the basic concepts...
Meaning of Debt Relief Solutions
A debt relief solution can be defined as a remedy that is used to curb the volume of debts. Debt relief is usually provided by most of the debt relief programs and debt management programs. Some of the commonly used ones have been listed below.
The easiest and the cheapest of all solutions is credit counseling. The concept of credit counseling is a very simple concept. Credit counseling is basically a consultancy session where experts provide you with excellent solutions, on the basis of your current financial status and your credit rating. In cases of serious debt problems, these experts also provide people with excellent methods to calculate the actual amount of debt and interest. These experts render many significant methods and procedures about how to repay all the creditors and keep the credit rating satisfactory. The concept of debt management and credit counseling can be summed up as a counseling session for an indebted person to help explore the following:
- How to calculate the exact amount to be repaid.
- How to read and understand the terms and conditions of different credit creation facilities such as loans and credit cards.
- What is the best method and the sequence to be followed while repaying a set of different debts.
- How to calculate and execute the pro-rata sequence of payments.
- How to keep the volume of debts in check.
- Which is the best method to understand if a particular credit facility suits you.
A debt settlement is a totally different concept from most of the other solutions, due to the fact that the debt settlement procedure includes negotiation with the creditors. Debt settlement, also known as debt arbitration, is initiated in a situation where the debtor is basically stuck in a position where he is unable to repay the creditor the promised monthly installment, and the creditor is not able to recover the lent amount from the debtor. In such a case, the debtor and the creditor negotiate a certain amount of installment that the debtor is easily able to pay up and the creditor is willing to accept the negotiated amount without sustaining heavy losses.
There are several ways in which a debt settlement can be initiated. One of the most common ways to initiate a debt settlement is with the help of a debt settlement letter. Another alternative way to initiate a debt settlement is with the help of a debt settlement agency or a lawyer. Almost all the debt relief programs constitute a debt settlement initiative. To sum up the concept of debt settlement, we can list out the following constituents.
- Debt settlement is a negotiation process that can be initiated by either the debtor or the creditor.
- Both the parties, the debtor and the creditor, have to sustain losses in some or the other form.
- It enables the creditor to recover the maximum possible amount.
- The credit rating of the debtor is also not severely affected by the settlement and in maximum cases, the late payments are not recorded or are erased.
Money management is a concept that is similar to credit counseling. However, in this case, suggestions that are given are based on approximate calculations of the pro-rata repayments. The consultants who suggest money management figures and ratios, acutely examine the current credit ratings. The consultants suggest calculated income and expenditure ratios and a ratio between income, debt repayment and expenditure.
If these ratios are effectively used to make debt payments, then the credit ratings of the person in debt tend to improve, and this also results in the timely payment of installments. These ratios, if used properly and effectively, reduce the debt exposure of the individual along with the debt to income ratio, thereby making the installments rational and realistic. Money management is a very effective service that includes that following features.
- A disciplined ratio is established between the income and expenditure.
- The credit ratings of the individual improve.
- The debt exposure of the individual is reduced.
- There are no missed payments and late payments
- All the installments become more affordable.
Debt consolidation is again a form of loan or credit where the lender provides the borrower enough debt assistance, financially, so that all the debts can be paid off immediately. This loan can be then paid off later on and it usually has a long period of time and a very low rate of interest. One of the advantages of debt consolidation is that the person's credit rating is not affected. Debt consolidation loans can thus be summed up with the help of the following points.
- All the existing debts can be paid off immediately.
- The credit rating is not affected.
- There are no late payment records.
- The consolidation loan has a low installment and lowered rate of interest, with a very long and convenient time period.
Debt Relief Services
There are many successful services like credit card debt settlement process, debt management and debt relief programs, that will help you to get out of debt fast. You can also get out of debt with the help of proper debt management programs.
Debt Relief Grants
Among the many different debt relief options is governmental aid through debt relief grants. The governments in some regions tend to provide small grants to save individuals from insolvency. Debt relief grants and the regulations related to such grants often tend to differ from region to region and case to case.
Tips and Advice to Choose the Right Debt Relief Program
There are some genuine guidelines that you can follow while choosing the appropriate remedy for yourself. The remedy can be a business debt relief or even a debt relief program.
- Choose a debt relief solution that has a very low service charge. Also make sure that you get all your needs and demands fulfilled in the process, otherwise you will end up spending money unnecessarily.
- Make sure that you maintain a good credit rating while implementing the services.
- It is also very important that you aim at total eradication of the debt and avoid settlement.
- Never choose bankruptcy as a debt relief solution because it remains on your credit report for almost 10 years.
- Opt for a credit repair facility once you clear off the majority of debts.
There are several other simple ways to get rid to debts if the amount is reasonable. One of the simplest ways is to save up and cut down on unnecessary expenditures. Try this, it has worked wonders.