2 Effective debt solutions: Debt management and debt settlement
You can pay off your debts and eradicate negative items from your credit report with the various types of debt solutions that are offered by different debt relief companies. In this article we will discuss about 2 types of debt solutions – debt management and debt settlement. However, you must evalutate the benefits and drawbacks of the programs available to find out which one will suit you best.
Debt management
Debt management program helps you pay back the unpaid debts. A debt management company evalulates your financial situation and devise a repayment plan that suits your needs.
Benefits
Here are the few benefits of debt management program:
• Stops creditor harassment: After you have enrolled in the debt management program, most of the creditors will stop disturbing you because they know that you are trying to pay them.
• Saves you from bankruptcy: The debt management company creates a monthly payment plan for you. You can easily make the monthly payments and don’t have to file bankruptcy.
• Does not affect credit score: Unlike bankruptcy and debt settlement, this program does not hurt your credit score. You can rebuild credit gradually.
Drawbacks
Here are the few drawbacks of debt management program:
• Debt management fees: The debt management companies charge fees for their services. Some companies may even ask you to pay upfront fee. This creates additional burden on you.
• Secured debts: Only unsecured debts like credit card debt, and personal overdrafts can be included in a debt management program.
Debt settlement
This is one of the most aggressive debt solutions that are available in the market. This program helps to lower the payoff amount.
Benefits
Here are the few benefits of debt settlement program:
• Lower the payoff amount: This program helps to lower the debt balance by 40% to 60%. The settlement company negotiates with the creditors to lower the payoff amount.
• Relief from collection calls: When the settlement company informs the creditors that you have enrolled in the program, the creditors stops making collection calls to you.
Drawbacks
Here are the few drawbacks of debt settlement program:
• Lowers your credit score: A debt settlement program can hurt your credit score and you might not be able to secure new credit soon. It can lower your credit score by 50 points.
• Taxable income: You are required to pay taxes for the debt amount that has been waived off by the creditors.
You can reduce your debt load with the help of these 2 effective debt solutions and can get back to your normal life.
Debt management
Debt management program helps you pay back the unpaid debts. A debt management company evalulates your financial situation and devise a repayment plan that suits your needs.
Benefits
Here are the few benefits of debt management program:
• Stops creditor harassment: After you have enrolled in the debt management program, most of the creditors will stop disturbing you because they know that you are trying to pay them.
• Saves you from bankruptcy: The debt management company creates a monthly payment plan for you. You can easily make the monthly payments and don’t have to file bankruptcy.
• Does not affect credit score: Unlike bankruptcy and debt settlement, this program does not hurt your credit score. You can rebuild credit gradually.
Drawbacks
Here are the few drawbacks of debt management program:
• Debt management fees: The debt management companies charge fees for their services. Some companies may even ask you to pay upfront fee. This creates additional burden on you.
• Secured debts: Only unsecured debts like credit card debt, and personal overdrafts can be included in a debt management program.
Debt settlement
This is one of the most aggressive debt solutions that are available in the market. This program helps to lower the payoff amount.
Benefits
Here are the few benefits of debt settlement program:
• Lower the payoff amount: This program helps to lower the debt balance by 40% to 60%. The settlement company negotiates with the creditors to lower the payoff amount.
• Relief from collection calls: When the settlement company informs the creditors that you have enrolled in the program, the creditors stops making collection calls to you.
Drawbacks
Here are the few drawbacks of debt settlement program:
• Lowers your credit score: A debt settlement program can hurt your credit score and you might not be able to secure new credit soon. It can lower your credit score by 50 points.
• Taxable income: You are required to pay taxes for the debt amount that has been waived off by the creditors.
You can reduce your debt load with the help of these 2 effective debt solutions and can get back to your normal life.