Many residents in Virginia as well as in other parts of the country are looking to get debt relief from high-interest credit card bills and unsecured debts such as medical bills, department store charges, and even utilities and may be wondering if debt management or some other debt relief option is their solution?
If you are in a similar situation, there are many ways to get debt relief, whether it's in the form of debt consolidation or a debt management plan (DMP), debt settlement, or even bankruptcy. Some consumers may even consider applying for debt relief grants. However, there is no form of debt relief government grant or assistance available to consumers. While government largesse and bailouts have provided a lifeline for banks and other large financial institutions, there is no credit card debt relief grant for consumers.
Fortunately, there are many relief options that could provide savings and are available to individuals like you who seek debt relief, including credit counseling and debt settlement. These days, both of these methods have become popular alternatives to bankruptcy which typically has a more damaging impact to one's personal credit.
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How Debt Management Programs Work
Often when consumers struggle with credit card debt, they also have to deal with unwanted pressure coming from bill collectors, or emotional and physical stress over the uncertainty of their financial situation. If you are in a similar situation, enrolling in a debt management plan - or what's also known as debt consolidation - can typically help reduce your debts sooner than you could on your own, if you continued to make only the minimum amount due on your credit cards at higher interest rates. Let's compare some debt relief programs:
Debt Management Plan Through Credit Counseling
The goal of a debt management plan is to "consolidate," or combine, your unsecured debts into a single, more manageable payment made to a credit counseling agency. A credit counselor, working on your behalf, will review your finances, your income, and your debts. When the credit counselor has all the financial information needed, he or she will typically submit proposals to creditors requesting lower interest rates, the removal of late fees and penalties, and generally, ask for more favorable repayment terms that are designed to provide you with more options for savings and relief.
Those creditors that accept the proposals are added to what is referred to as a debt management plan, or DMP. Credit counseling agencies, in turn, distribute those funds to creditors that are in the plan. As mentioned earlier, by paying off your debts - hopefully at a more affordable rate and at a structured pace that you are more comfortable with - you can typically reduce debts sooner than when you continued to pay only the minimum monthly payment on your credit card bills at higher interest rates.
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Credit Card Debt Settlement
Credit card debt settlement is yet another type of debt relief that has helped many consumers reduce the amount of their debts. Unlike enrolling in a debt management program where a consumer pays back the entire amount of their debts, consumers who sign up for debt settlement are hoping to settle with their creditors for substantially less than what they owe. However, like other debt relief methods, debt settlement also comes with its own set of caveats.
First, as the term "settlement" implies, credit card companies are certainly not legally required to accept the settlement proposal; basically, they may or may not agree to settle with consumers. In addition, consumers are typically advised to stop making their credit card payments in order to save up funds, over a period of time, which they can then use to make a reasonable settlement offer.
In many cases, creditors may threaten to take legal action against consumers who fail to make their monthly payment while those consumers are in the process of saving money for the settlement. Additionally, consumers who default on the terms of their credit card agreements typically see their credit scores decline.
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Debt Relief - Offers Choices and Savings
In spite of these risks, debt settlement remains a popular alternative to bankruptcy, which can have a more serious and longer lasting impact on one's personal credit. The bottom line is, whether you choose to enroll in a debt management program through credit counseling, or choose debt settlement, make sure that you do your due diligence to help make the process of reducing your debts smoother and worry-free.
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