A Consumer Debt Relief Program Means Zero Debt in Less Than 36 Months

The aim of a consumer debt relief program is to eliminate an agreed percentage of the money you owe to creditors and/or improve affordability through a reduced payment. Prior to proceeding with a debt settlement program or Debt Management Plan it is necessary to establish that this is the most appropriate course of action.

Improved Budgeting

Consolidating credit card debt with a loan can reduce payments, but this may not be the best route to take. Non-profit debt counseling services are able to resolve up to 40% of debt problems by helping their clients to identify ways to reduce spending or even make some extra cash.

What is a Consumer Debt Relief Program?

A professional advisor will negotiate with creditors and collection agencies to reduce the amount owed and/or paid each month. It involves changing the T&C's of the agreement in order that some or all of the debt can be re-paid on different terms.

A Debt Management Program involves a full budgetary analysis to establish an affordable monthly repayment. There is no debt write-off, but many collection agencies are prepared to stop further charges and freeze interest payments to reduce the repayment time. The major downside to this debt solution is that it can take a while before the debt is cleared.

Whilst a debt settlement program is aimed at achieving affordability, the objective is also to reduce the principal (amount owed) by up to 50%. The remaining debt is then cleared over a period of 12 to 36 months. The 15% management fee will be factored-in to any calculations. Avoid plans where any fees are front-loaded (charged up-front).

FICO Credit Score

One reason why a consumer seeks an alternative to a consumer debt relief program is the effect that entering one has on their credit score. However, the chances are that those who have missed payments have an adverse credit history already.

A creditor is unlikely to agree to a reduction in the amount they receive if the debtor is consistently making payment. It is normally only possible to enter a program once the account has been passed to a collection agency. For this reason, concerns over a worsening credit score are a bit of a myth.

Whilst a consumer debt relief program will help to achieve affordability, talk to a non-profit debt counseling service to see if better budgeting can alleviate financial difficulties. There are several ways of consolidating credit card debt so it is important to get expert advice to establish which method is most suitable for your personal circumstances.

Disclaimer: This article in no way attempts to provide legal, financial or tax advice. One should consult a licensed attorney, tax advisor, or other qualified financial professional before proceeding.