Debt relief programs provide a lot of methods through which a debtor can get relief from their debts.
This involves seeking credit counseling which in turn leads to enrollment in a debt management program.
There are a lot of debt relief options from which a debtor can choose the option which will suit him the best.
Some of the popular options are Debt consolidation and Debt settlement.
We shall be discussing these options in this article.
Debt Settlement: Debt settlement is a way in which a debtor and the creditor can reduce the total amount of debt through negotiations.
This is a legal process which is appropriate for those who are on the verge of filing for bankruptcy.
If your debt is mostly in the form of credit card loans i.
e.
, unsecured loans and the total amount of the loan is over ten thousand dollar then you might be able to eliminate as much as 60 percent of your total debt.
Debt settlement does have a negative impact on the credit score given that the debtor has defaulted on their account but it is not as much as expected.
Debt Consolidation: This is a method suitable for those who have both secured as well as unsecured debt.
However in practicality it is more beneficial if a person has a lot of credit cards.
Using this option a person can take out one loan to pay off their many loans.
This is done in lieu of getting a lower rate of interest as the rate of interest of the credit cards is very high.
It is always advisable to get another unsecured loan from the bank to pay of these loans.
Debt Consolidation does not impact the credit rating negatively.