Debt relief is consisted of all the possible ways to pay off debts, and thereby save a chunk of money and time, concerning the debt payments.
It is a wide phrase, that is circulating several subparts, where all are aimed to deliver you the optimum satisfaction related to debt pay off structures, and saying goodbye to your overall debt situation.
With time things have changed, and professional debt relief services have now got merged with Do-It-Yourself portfolio. Hence, it is not anymore mandatory for you to take professional help, for getting your debts cleared.
Even though for a very few selected debt relief programs, professional help and consultancy is required, still most of the methods you can follow up on your own.
That’s what we shall be pulling down in this post. Revealing the most important and best debt relief options to help you save money, is what we will be doing precisely.
Hence, starting with the most appropriate debt relief option ever.
Debt settlement- the age long practice of debt forgiveness and negotiation:
Credits and Debts are not any new concepts. They have been a part of the human civilization for a long time.
This debt relief option, called debt Settlement, has been practiced by humans since the ancient days, and at times can be traced back to prehistoric civilizations.
Like the Sumerian civilization holds several records of probably the first credit cards, and loan agreements. It hadn’t necessarily needed to be money or currency, it could have also been borrowing and lending of commodities, and general household items.
Debt settlement is totally dependent on the art of negotiation, and its rate of success in giving you debt freedom, is based on how well an agreement goes between the lender and borrower, to reduce the total debt balance and other penalty or extra charges.
Yet, to keep in mind, debt settlement can only work out for unsecured debts.
You cannot settle mortgages or car loans, using this debt relief option.
You can do settlement by contacting the lender and speaking out the whole proposal yourself, or take help of a professional debt settlement company and let them do the whole negotiation, in exchange for a small service fee.
By taking professional help, you can expect to see a better reduction or forgiveness on the total owed amounts.
However, debt settlement can get very confusing and tough, if the lenders or the financial institutions are not complying to negotiate your debts, and give you a reduction on your outstanding balances.
Thus, it is important to take note of the fact, that DIY (Do It Yourself) Debt Settlement is not easy at all!
But, this debt relief option can really turn out to be the most effective, if everything goes neat and as planned. Debt settlement has the power to let you live your debt free dream.
Debt Consolidation- The most systematic and official debt relief option:
This debt relief procedure is divided into many subparts, where each are unique but carries the same message.
Debt consolidation is used only for unsecured debts, just like debt settlement. But, unlike settlement, this won’t involve negotiating your debt balances, rather will mostly include interest rate adjustments and a scheduled payment plan.
Usually debt consolidation signifies the process of bringing all your unsecured debts into one single account, at one single interest rate.
The several ways to do so are listed below.
- Going for Credit card balance Transfer:
This is the best option to consolidate credit card debt.
All you got to do, is apply for a balance transfer card from the bank of your choice, and thereby accumulate the whole debt balances into this new card.
Once you do so, your existing cards will get freed of the debts and you will be having only one card to pay off.
One single card means one single interest rate. And if you are fortunate enough, then you might also experience a 0%APR introductory phase for this card.
This 0% APR period typically lasts for 6 months to 1 year. If you are able to pay off the total balance within this time span, then you can save chunks on the debt payments, as you can escape the interest charges fully.
- Taking out a consolidation loan or other secured loans:
Personal loans are sometimes marketed by lenders as consolidation loans for dedicated purposes. These loans are meant to serve DIY Debt consolidation.
Consolidation loans in general have low acceptance criteria. You can approach banks and/or credit unions, for taking out a personal loan, that is to be used to consolidate your debts.
Once your loan application gets approved, you should pay off all your existing credit balances and debts with this loan amount.
You will be then left only with this loan amount, and one single interest rate. You can then go on with the scheduled monthly payments for the loan, and need not to rush with the payments.
But, one thing needs to get clear. You got to make one calculation, that the interest charge of this loan should help you save more money, when compared to the total interest you are paying for the individual separate debts!
Best is, if you can find the loan with an interest rate that is an average of all the rates on each of your existing debts.
- Approaching a debt consolidation company:
This is only professional debt consolidation process, where a third party (the debt consolidation/debt relief company) will be involved.
These firms have the power to negotiate with the lenders and creditors for the removal of extra charges, penalties, late fees, and interest rates on the debts.
The firms will ask one monthly payment from you, and will then divide this amount among all of your existing lenders.
So your debts will get consolidated for good, where you have to do no hard job. All you got to do, is just pay the firm a service fee (compared nothing to your debts), and keep up with the single payments as per the monthly schedule set by the firm.
These firms also provide free consultation, and a lifestyle budget for your convenience.
Other DIY debt relief options to follow:
The other good ways to pay off debts and save money is to set up your own personalized payment structure.
There are two widely used payment formats. One is the debt snowball and the other is the debt avalanche. Both requires extra payments on certain debts.
Let’s liquify this.
- Debt Snowball:
This debt payment strategy was popularized by Dave Ramsay, the financial advisor, talk show host, and personal finance advocate.
This strategy asks you to make extra payments on your smallest amount debt, while maintaining the minimum payments on the other debts.
Once this smallest debt gets paid, you add the payment amount of this debt to the next smallest amount debt, and keep on repeating the process, till all the debts get cleared.
This is a fool-proof debt pay-off method, and requires you to prioritize your debts in a descending order of interest rates.
You begin by making extra payments on this high interest debt, and clear it over, while trying not to skip the minimum payments on the other ones.
You go on like this, and sooner should the stingy debts get payed off, if you can maintain the extra payment amount, through-out!
That’s how debt relief works in helping you to save quite a lot of money on the overall debt payments.
Read the above discussed methods in full detail, and leavy below any queries you have.
Have a happy debt free life ahead!