What Debt Relief Programs Can Do For You

Oct 19, 2020 5:10 AM ET

Oct 19, 2020 1:10 AM ET
iCrowd Newswire – Oct 19, 2020

There are lots of different things out there billed as debt relief. While a lot of it sounds good, it’s important to differentiate between the facts and illusions.

To that end, this is what debt relief programs can do for you.

Credit Counseling Services

Credit counseling is typically the first place you want to go if you’re having trouble with unmanageable debt. Just as you would go to a counselor for issues in your personal life, a credit counselor is there to walk you through where things have gone wrong, as well as where you can improve your finances.

Some debt relief programs offer credit counseling as part of their services. They can give you educational booklets and other guides to help you understand your debt—and how to get out of it. Credit counseling is typically a holistic sort of service, where you go over your whole financial situation. While this can feel invasive — and even embarrassing if you’ve made some mistakes you’re not proud of — credit counselors are professionals there to help you.

Beyond assessing your finances, they can assist with some basic things, such as creating a budget. Learn How Each Type of Debt Can be Managed or Settled! Depending on where you go for credit counseling, they may also be able to set you up with a debt management plan, or refer you to a trusted partner organization. Be wary of any credit counseling services that ask for money upfront, sneak in hidden fees, or just give you a “off” sort of feeling.

Debt Management Plans, Debt Settlement, and Debt Consolidation

One of the major benefits of working with a debt relief agency is it can provide you with an array of options for attacking your debt. Three of the most common options are debt management plans, debt settlement, and debt consolidation. These various debt relief programs all have their merits, but are not a one-size-fits-all situation.

Here’s how each service differs:

  • Debt Management Plans: Debt management is typically done through a credit counseling service. The counselor will work with you and your lenders to come up with a plan to repay your debts.
  • Debt Consolidation: There are a few different options for debt consolidation. One of the most common forms of debt consolidation — credit card balance transfers —doesn’t require any kind of assistance. But it’s also possible to work with a debt relief program to set up a consolidated loan. This is where similar but separate unsecured debts are rolled up into a single new loan at a lower interest rate. This can be a great way for people who want to pay back their debt to do so without doing damage to their credit.
  • Debt Settlement: A debt relief agency works to settle your debts with a payment that is significantly lower than the amount originally owed. While this has worked for many people, it’s worth noting this has the potential to damage your credit score since you stop making your scheduled debt payments while the money accrues to pay them off in full.

Beware of Illegitimate Debt Relief

Your finances are always at risk of fraud. There are people who make their entire living taking advantage of people in dire financial straits. If something seems off, walking away is better than sticking around to find out you’ve been scammed.

The Federal Trade Commission (FTC) provides two major points to help you identify a potential debt relief scam. First, they can’t legally ask you for payment upfront. This should always set off red flags if someone is asking for payment before providing you a service. They also can’t guarantee you anything. Run away from any organization that says they can guarantee you’ll get out of debt. That’s up to you, not them.

Debt can be an incredible pain in the rear. But it can be made a lot less obnoxious when you work through a debt relief program.