Debt Relief Loans: What are the Options and Consequences?

If you are overburdened with debt and cannot make any progress then to break free this financial burden you can check out for best debt consolidation programs.

Debt relief loans are not the right solution for everyone, and one should be aware of the consequences it might carry. It can wipe the debt out altogether; you can get changes in your interest rate or payment schedule for lowering your payments; or can persuade creditors to accept less than the full amount.

When to Seek Debt Relief

Consider bankruptcy, debt management, consolidated debt relief or debt settlement when either of these is true:

• You cannot repay debts such as credit cards, personal loans, and medical bills within 5 years, even cutting spending.
• Total of your unpaid debt equals to half or more of your gross income.

And if you think you can repay your unsecured debts within 5 years then think of do-it-yourself plan.

Beware: Debt Relief Can Make Things Worse

There are scammers everywhere who are eager to takewhatever money you have. Most of the people who take debt relief loans fail to repay them. You might end up with larger debts.

But debt relief will definitely give you the new start that you need to finally make real progress.

Check out these points before entering any agreement:

• Eligibility
• Fees
• Make sure you understand who owns the debt so you make payments to the right agency.
• Tax implications

Debt Relief through Bankruptcy

If you would not be able to pay as agreed then you should not enter best debt consolidation programs, debt settlement or management programs. Talk with bankruptcy attorney, first consultation is free, and if you do not qualify, then move to other options.

The most common form of bankruptcy, Chapter 7 liquidation, will remove most of your debts. It can take3 or 4 months if you qualify. Things to know:

• It will notremove taxes owed or child support obligation, and student loans cannot be forgiven.
• It will hurt your credit scores and will be there for up to 10 years. Poor credit history affects your eligibility for certain jobs, chances of getting apartment lease, and car insurance. Bankruptcy can help you to rebuild credit score once repaid the debt.
• Co-signer for your bankruptcy filing will be responsible for your debt.
• If debts pile up, you cannot file Chapter 7 bankruptcy for 8 years.
• If you have to give up your property then it is not the best option.
• It you don’t have any income or property then creditors can still sue you and get a judgment.

If your income is above the median, or you have a home you want to save from foreclosure, then you should file for Chapter 13 bankruptcy.

Relief through Debt Management Plans

Consolidated debt reliefordebt management plan allows you to pay unsecured debts in full. You will have to make a one payment each month to a credit counseling agency;the agency will then distribute it among creditors.Your credit card accounts will be closed until you complete the plan.

Debt management plans do not affect your credit scores, but closing accounts can hurt them.

Missing payments can moveyou out of the plan; also it is vital to choose an agency accredited by the National Foundation for Credit Counseling or the Financial Counseling Association of America.

Relief through Debt Settlement

Debt settlement is a financial game; bankruptcy is always a better option as debt settlement is a last option for those who are facing overwhelming debt and cannot qualify for bankruptcy.

The companies ask you to stop paying your creditors and put the money in an account they control. Money is accumulated in your account and you fall further behind on payments. Creditors fearing of getting nothing at all make them to accept a smaller lump-sum offer and waive off the rest.

Not paying bills result in collections calls, penalty fees, or legal action. Debt settlement cannot stopthese things while you negotiate.

You might face a bill for taxes on the forgiven amounts.

You can try to settle your debt yourself though consolidated debt relief, debt relief loans, or can hire a professional.