Consumers have found themselves buried under credit card debt and most feel helpless in gaining control. With rising interest rates and increasing payments, many are struggling to make ends meet. Coupled with a poor economy, job loss and pay cuts, many are hanging by a thread to keep their monthly bills paid. This has set in motion a number of debt recovery relief programs. Many consumers either do not understand what these programs offer or are too embarrassed to seek help. The average person does not enjoy discussing their debt situation and most feel guilty and embarrassed by their troubling financial situation. What they fail to realize is that there are millions of people struggling with the same or similar financial burdens. There are many programs available for financial relief such as debt consolidation, debt settlement or debt management program.

Debt Consolidation

Debt consolidation is simply obtaining a loan to pay off all your existing debts. This way you reduce the monthly payments of all your debts into one affordable monthly payment. The only way this works is if you do not incur additional debt once, you have paid them off. For many people obtaining a loan at an affordable interest rate is not an option due to their low credit score. Your goal should be to reduce your monthly payment and still have a reasonable interest rate so you will be able to pay off the loan. Often they may be approved for a loan but it is insufficient to pay off all their debts so they are still left struggling to pay the high interest rates and high payments of some accounts.

Debt Settlement

Debt settlement is a legal process in which you negotiate a settlement of your debt with each company that you owe. Most people retain an attorney that specializes in debt settlement programs that will negotiate the settlement and terms for them. For example, if you owe a credit $15,000 and you have $10,000 to put towards the debt, you can negotiate with the creditor to accept the $10,000 as full payment of the debt. This example is just one of many ways an attorney can negotiate your debt. Here you have to decide if it is worth paying attorneys’ fees to reduce to your debt. In addition, once the terms of the settlement have been agreed upon, it becomes a legal and binding contract. If you do not comply, you may end up in a worse financial situation than you were in before the agreement.

Debt Management Programs

Debt management programs have become very popular among those that are trying to get control of their credit card debt. A reputable program will negotiate lower interest rates, lower payments and often can get creditors to waive late fees on your accounts. You must provide financial information and agree that you will no longer use your credit cards. The program submits proposals of a payment plan to your creditors.  If your creditors approve the proposals, then you agree to pay a set amount to the debt management program, which in turn distributes the payments to your creditors. The guidelines are very strict and you cannot be late or miss a payment. This program is popular due to the fact you can apply online and you never have to sit with anyone face to face. This aspect is appealing to people that are uncomfortable discussing their financial situation with a stranger. The program requires a monthly fee, however, if you choose a reputable company that monthly fee is a minimal amount.

Choosing the best program to meet your financial needs does not have to be difficult. The best way to start is to organize all your financial information in one file, which includes living expenses, debts and income. If your credit score has not suffered greatly, you might start applying for debt consolidation loans and see what offers are available. If debt consolidation does not work for you, then consider a debt management program. It would probably be best to use debt settlement as a last resort; however, your financial situation will dictate the program that is best for you. Before you proceed with any company, make sure you research the company’s background and reputation. There are many programs available to help you get control of your debts, just choose wisely and carefully.

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