The United States is facing a growing debt crisis. It’s not surprising that delinquencies related to credit card debt at least three months late are rising, given the high burden of monthly debt commitments on families today. However, debt relief applications can be submitted. There are structured and formal debt alleviation programs, but this article addresses the pros and cons of applying for debt relief.
Pros
1. You Can Get Out of Debt in a Specified Period
Payday loan debt relief is common with most borrowers. Creditors can be settled through debt relief schemes. A debt will be repaid over time in increments, with each installment significantly smaller than the total amount owed.
2. It Provides You with a Structured Plan
Planning and self-discipline are necessary to adhere to your design debt alleviation plan. Some families are capable of doing this entirely on their own.
Those who have accrued substantial debt may have gotten into the predicament they now find themselves in because they could not handle the routine of making their repayments. It might be difficult to prioritize which bills to pay off first, establish a regular savings plan, and keep to it, all while dealing with debt.
3. You Track Your Payment Progress
It’s your responsibility to ensure that the payment is correctly distributed to your creditors. Most debt programs will need you to transfer the funds to them instead of providing it straight to the creditors. Most of these organizations will carry on their promises to help you.
Still, it takes a single buggy app to make your life a financial nightmare. It’s a good idea to double-check the agency’s claims about the settlement and to keep tabs on whether or not the creditor is being paid based on the terms you worked out with the debt reduction program.
4. Lower Your Debts Faster
Debt relief, often known as working with a debt relief organization, can help you get out of debt faster and for less money.
5. Avoid Becoming Bankrupt to Debts
Based on your current financial condition, resolving your debts can be preferable to declaring bankruptcy. Given that everyone’s financial situations are unique, it’s essential to discuss your situation with a debt relief professional before deciding whether debt settlement or relief is the best option for you.
Cons
1. It May Not Assist Your Credit Score in Debts Relief Programs
If you sign up for a debt relief plan, the company representing you will handle communications with your creditors. They’ll negotiate a reduced settlement sum that’s still better than the amount owing.
The negotiated settlement is then broken down into monthly payments over a predetermined number of months. Most debts have payment terms of between one and four years. If you pay off this balance, it will be marked as “settled in full” rather than “paid in full” on your credit report. The credit rating may suffer as a result of this.
2. Not Everyone Qualifies for the Program
In most cases, a person or family must accrue a specific debt before being considered for a debt relief program. Because a creditor is unlikely to commit to a settlement for a lower amount that may be paid off quickly, this alternative is often meant to manage a larger debt.
Debt relief programs are open to those with a wide variety of debt, including private education loans, medical bills, and substantial credit card balances. Some forms of unsecured debt also qualify. Every application is reviewed individually.
3. Certified Fund Requirement for Some Programs
Because of this drawback, you must exercise caution while selecting a debt relief service to negotiate with your debtors. Certain organizations demand payments that should be verified each month. They can only accept cash, direct wire transfers, or cashier checks. Your ability to use a debit card or initiate an ACH transfer may be restricted.
4. One Missed Payment Could Make You Start Afresh
Paying on time consistently is essential to the success of any debt relief scheme you enroll in. Even a one-day delay in payment can result in permanent removal from the program. In such a case, you’ll almost certainly stop receiving settlement money.
5. You Might Owe More In Your Taxes
The IRS may deem any amount written off as forgiven dues in the US taxable income. This drawback does not apply only when a person is entirely insolvent, which occurs when their total debt exceeds their total assets.
Conclusion
You don’t usually end up in debt without intentions. Unfortunately, families run into problems not only because of medical bills or emergency needs but also because they cannot set some funds aside each month to help them get back on their feet. Applying for debt relief comes with the benefits and limitations discussed in the above article.
