When it comes to eliminating debt and ensuring a debt-free future you have four main options available … but how do you know which one is right for you? Here’s a quick summary to help you make the best decision.
Debt Relief Option #1 – Debt Consolidation
While a common consideration for those with high credit card debt, debt consolidation offers some fairly significant disadvantages.
- Debt consolidation does not reduce the overall amount of your debt. With a debt consolidation loan you’ll still pay back 100% of your debt, plus interest. A debt consolidation loan basically transfers your credit card debt from one place to another.
- Debt consolidation loans are usually “secured” loans that cannot be lowered or negotiated. This could put your home, car or other personal assets at risk in the event of default.
- Funds from the debt consolidation loan are used to pay off your credit card debt. For some people, having credit cards with zero or low balances is too much of a temptation. Before they know it, they’re back in the same position again with high credit card debt.
Do your research before you choose Debt Consolidation. It’s a decision you’ll be living with for many years to come.
Debt Relief Option #2 – Credit Counseling
Credit counseling organizations usually try to reduce the interest rates and fees associated with your debt. Like debt consolidation, though, credit counseling doesn’t actually reduce the amount you owe. You’re still responsible for 100% of your total balance.
Many people are also surprised to learn that credit counseling can actually cause your monthly payment to go up. If you’re looking for some immediate financial relief and want to have more money in your pocket for rent, food, tithing and more, credit counseling may not be the best option for you.
Debt Relief Option #3 – Bankruptcy
Yes, bankruptcy will often eliminate all of your debts… but it also produces some significant negative consequences that you should be aware of.
- The bankruptcy will show on your credit report for at least seven years
- It will be much harder to obtain loans or other forms of credit in the future
- The higher interest rates you pay as a result of filing bankruptcy may offset any gains you received from eliminating your debt
- You’ll likely have unexpected attorney expenses due to laws that were recently enacted
- A credit counseling course will be required within six months of filing bankruptcy…even if you have already taken one
- Bankruptcy will stay on your court records for 20 years and could easily be uncovered when you apply for a job, a loan or rent an apartment
In addition, bankruptcy has a social stigma that many people prefer to avoid. Think long and hard before choosing bankruptcy as a debt relief solution. In most cases, it should be your last choice.
Debt Relief Option #4 – Debt Settlement
The three previous debt relief solutions all have some fairly significant negative consequences to their use – from not reducing the overall amount of your debt to taking five years or more to get you out of debt to potentially increasing your monthly payments.
Debt settlement, though, offers some of the best features of the other methods and eliminates many of the negatives. That’s why we believe that debt settlement is a great choice for those looking to reduce or eliminate their debt.
With debt settlement you’ll:
- Immediately lower your monthly payment
- Reduce your credit card debt
- Become debt free in as little as 24 months
- Pay no fees until your debt is reduced
Have more questions or want to learn more about the FaithWorks Financial debt settlement program? Visit our FAQ page or click here to receive a free consultation and quote from one of our friendly Christian Debt Advisors.