People who are struggling under the burden of multiple debts, including credit card and personal loan debt, have a few options for paying it all off. One of those options is a debt relief program, also known as debt negotiations or debt resolution.
How do debt relief programs work? Debt relief means you pay back your debt in multiple payments that are significantly less than what you actually owe. The good news is that after your debts are resolved, debt collectors can’t keep harassing you. Some risk is involved—your credit score may take a hit—but for many consumers, debt resolution is a path to financial freedom.
Who Can Benefit from Debt Relief Programs?
Debt relief programs can be a helpful resource for people who have struggled with debt for years and need a way out. Are you wondering, “how do debt relief programs work?” and “is debt negotiation right for me?” You might be a great candidate for debt relief if you fit in one or more of these categories:
- People with large amounts of unsecured debt, such as credit cards, personal loans, and medical debts (federal student loans, car loans, and mortgages don’t qualify)
- People who have struggled to make minimum payments
- People who want to break out of the entrapment of debt
Debt relief programs are beneficial for people with large amounts of debt, because creditors may be more willing to settle over bigger sums. Paying back debt requires discipline and strategy, which can be especially hard if you are already struggling with debt repayment in the first place. Debt resolution brings in a professional to develop a plan, negotiate with creditors, and help you work your way out of debt.
How Do You Get Debt Relief?
Debt relief programs are available through a debt resolution company, such as CreditAnswers. Through a reputable company, you can receive a free debt consultation to discuss your options and then apply for a debt relief program.
How Do Debt Relief Programs Work?
Once you’ve contacted CreditAnswers to begin the process of settling your debts, we will help you through each of these steps:
- We will help you set up a special savings account. You will make deposits into this account instead of directly to your creditors.
- Once you have enough funds in your account, we will negotiate with creditors to substantially lower the debt amount owed to each creditor.
- When all your debts are paid, you will be done with the debt relief program and you will be debt-free.
Throughout the entire debt relief process, you will be working directly with the debt resolution company to successfully resolve your debt.
Risks of Debt Relief
Debt relief does not come without its risks. There are a number of drawbacks to debt relief, including:
- Because you won’t be making payments directly to your creditors on your debts, your credit score will drop. The accounts could stay on your credit history for up to seven years.
- The IRS considers forgiven debts to be income, so you may owe taxes on your debts.
- There’s no guarantee that your creditors will agree to lower your debt.
Benefits of Debt Relief
Even with these drawbacks, many people struggling with piles of consumer debt find relief programs to be beneficial, helpful, and liberating. Benefits of debt relief programs include:
- Paying significantly less money to get out of debt than you would otherwise by making payments and paying interest on your debts over time.
- You will become debt-free, with a clean slate to start building your financial future and building your credit score back up again.
- You will get out of debt faster, leaving you feeling free sooner than you would otherwise be in making your original payment plan.
How do debt relief programs work? This guide should help you get started understanding debt consolidation and how it can work for you.
If you want to learn more about how debt relief can help you, sign up for a free debt assessment from CreditAnswers.