What Are Different Types Of Debt Relieving Option?

Posted by Alison Henry on September 7th, 2017

Any debt that is not tied to an asset, like home or vehicle, is called unsecured debt. Its most common meaning is credit card debt; however, they can also imply personal loans or medical debt. Unsecured debt cause less stress for the consumer as they don’t have to lose an asset if they fail to repay the debt.

Unsecure debt also allows a person to take help of unsecure debt relief solutions which we have discussed as follows.

Debt settlement

In this solution, Debt settlement companies typically ask you stop paying your creditors and put the money in an account they can control. Each creditor is then accessed as the money start accumulating in that account; you fall behind on payments. Fear of getting nothing at all encourage the lender to accept small lump-sum amount and persuades them not to ask for the rest.

The time for settlement may take years depending on how much you owe. Unlike bankruptcy, you will also face penalty fees, collection calls, and even legal actions for not paying bills.

This option is recommended for those who face enormous debt but are not eligible for bankruptcy.

Debt management plans

Debt management plans allow you to pay off unsecured debts – usually with credit cards (in full) at the reduced interest rate or fees waived off. Through such schemes, you make a single payment every month to a credit counseling agency which further distributes this amount among your creditors. Credit counselors and credit card companies work in close collaboration to help debt management clients.

Your credit card accounts will be most probably closed, and you cannot use credit cards until the plan is over.

Bankruptcy

There is no point to signing up for a debt settlement or management plan if you are not in a position to make all the payments you agree to. In such case, you should first talk to a bankruptcy attorney before you pursue any debt relief plan because it involves a complex legal process. It is the most drastic choice of all the options.

Do-it yourself

It all depends on how much debt you owe and how you are able to manage it by tightening your budget, increasing the amount of money you pay to the creditors. It is not a common as well as a practical solution for most of the people. Plus, it takes too long to pay off the debt.

Choose a plan that goes best with your condition. If you are not able to find the right solution, it is advisable to seek consultation from a debt relieving company.