Debt relief programs rescue countless people who are facing financial difficulties. As fast-acting and effective financial aids, these debt relief programs not only help you in balancing your budget but also pay off the escalating bills. Debt consolidation, debt settlement, repayment plans and debt management services are some of the debt relief options available to those desiring to get out of debt.

Given below is a detailed description of the most sought after debt relief options:

Repayment plan:

Choosing the right repayment plan is your first step toward meeting your financial goals. Given below are the advantages and disadvantages of repayment plan.

• Payments made on time for an extended period will help in improving your credit score.
• Total interest paid is reduced.
• It gives mental satisfaction as each debt is paid in full.

• Self discipline is required to stick to the plan.
• No new credit can be made.
• Current lifestyle needs to be changed in order to meet the debt obligations.
• Following the repayment plan becomes difficult if your basic necessities plus debt payments exceed your income.
• Apart from saving money for the repayment plan, you must also keep money aside for emergencies and unexpected expenditures that might arise during the repayment period.

Debt Consolidation:

Consolidating your existing debts is another viable option to get out of debt. Prior to taking the debt consolidation route take a look at its pros and cons.

• You have to make just one payment at the end of each month. It has been noticed that the average citizen pays 12 different creditors every month. Therefore, it becomes very difficult for the individuals to figure out whom to pay. With the help of debt consolidation all your debts are being combined, this makes managing your finances much easier.
• Debt consolidation can significantly reduce high interest rates.
• With reduced interest rate and one monthly payment, the amount you have to shell out each month is decreased significantly.
• If you are planning to use a first or second mortgage as a debt consolidation loan then the interest is tax-deductible.

• Reduced monthly payment indicates easier load to bear and more money left over at the end of the month. This might tempt you to take on more debt.
• Even though the interest rate is reduced, the repayment period is extended. Thus, you may end up spending more money than what you would have if you had kept each individual loan.
• You can lose everything. If you take out a secured consolidation loan against your home and you miss two to three payments, in that case you might even loose your home.

Debt settlement:

You can settle the debts on your own. If you wish to seek professional advice on settling your debts then you can take help from debt settlement firms. Given below are the advantages and disadvantages of debt settlement.

• When an account becomes delinquent, the late fees and over the limit charges get accumulated with the total debt amount. Debt settlement helps you in reducing 40% - 60% of the original debt amount, interest charges and late fees. Thus, it saves you thousands of dollars.
• In this process you do not have to pay to 12 different creditors at the end of each month. All you have to do is deposit a certain amount of money with your debt settlement firm at the end of each month. The settlement firm in turn saves the money in a trust account and start negotiating with your creditors when a lump sum amount is accumulated. The more you save each month the lesser time you take to become debt free.
• Most of the debt negotiation plans give you enough time to repay your debt. Most of the plans usually span from 2 to 4 years and sometimes even longer. This helps people who cannot afford to pay the whole amount of debt at one go and need some time to accumulate money.
• Debt settlement is definitely a better option than bankruptcy. Bankruptcy will stay on your report for 10 long years and can hinder your ability to get credit, a job, insurance, or even a place to live.

• Debt settlement plans require you to stop making payments to your accounts, as a result your accounts become delinquent or sometimes they are even charged off. This adversely affects your credit report and score.
• Many debt settlement companies will want you to sign an agreement stating that you will not take out any new credit or loan while settling your debt.
• While you stop paying your bills the collection calls will escalate.

Related Resources:

• Debt Relief Can Cause Headaches of Its Own - New York Times