NEW YORK, NY / ACCESSWIRE / July 8, 2024 / Many people struggle to stay out of debt. Those who find themselves with low bank balances, rising credit card debt, or frequent calls from creditors are not alone. According to a recent report by the Federal Reserve Bank of New York, the total U.S. household debt increased by $184 billion (+1.1%) in the first quarter of 2024, to $17.69 trillion, showcasing that debt across America is rapidly increasing mainly due to credit cards and automobile loans. While resolving debt might seem challenging for individuals, debt relief programs can provide a smart option for resolution, as they offer structured solutions to help individuals regain control of their finances and work towards a debt-free future.
Alex Kleyner, the CEO of National Debt Relief, discusses five essential debt relief programs to consider when trying to handle the pressures of growing debt, including debt negotiations or settlements, debt consolidation loans, balance transfers, debt management plans, and bankruptcy.
"At National Debt Relief, our mission is to empower individuals to regain control of their lives by reducing their debt burdens. We understand that debt relief isn't a one-size-fits-all solution, which is why our team of Certified Debt Specialists discuss options with clients to ensure they find a solution best suited for their unique situation," says Alex Kleyner.
Understanding Debt Relief Programs
Debt relief programs can be a good option for those who may be living paycheck-to-paycheck, with high amounts of unsecured debt and minimum payments they're struggling to make. Common examples of unsecured debt include credit cards, personal loans, small business loans, medical bills, some private student loans, and rent payments.
Debt relief programs offer a structured approach to help people and/or businesses reduce or eliminate their outstanding, unsecured debt. These programs can also provide a lower monthly payment or more manageable repayment options for those who are looking for a more flexible way to pay off their debt.
Choosing the right debt relief program is important in the debt relief process. Consumers should compare their options before making a decision. They should look for a qualified debt relief company that will often provide a free consultation, create a customizable, affordable plan tailored to the individual's financial situation, not charge upfront fees, and provide some financial education as part of their program. A prime example is National Debt Relief, which offers free, no-obligation initial consultations with a Certified Debt Specialist to assess an individual's goals and how they can best help support them. National Debt Relief never charges upfront fees and clients only pay once they've started making payments towards their first settlement. When it comes to success, National Debt Relief clients pay an average of 30% less than they originally owe across their accounts after fees, with the debt payoff taking an average of 34 months, and as little as 24 months.
Debt Negotiations or Settlements
Debt settlement involves negotiating with creditors to accept a lump sum payment for less than the total amount owed. This option has grown in popularity due to its potential for substantial savings. While individuals can negotiate settlements themselves, many opt to work with a debt settlement company, like National Debt Relief, to handle negotiations and manage payments. It is important to note that debt settlement can negatively impact credit scores and because it is a service, companies charge fees ranging from 15% to 25% (American Association for Debt Resolution (AADR) 2023). Debt settlement can also set you on the path to being debt-free, creating a more secure financial future. The benefits of using a debt settlement company are a reduction of the total amount owed, a quicker timeline for settling debt, more manageable payments fit a client's budget, and the debt settlement company handles the entire process on an individual's behalf, including creditor conversations, negotiations, and issue resolution, so their clients don't have to.
"It's crucial to partner with a reputable debt settlement company to ensure you're getting the full transparency and support you need," says Alex Kleyner. "While there are various ways to find a debt settlement partner, one way to do this is to visit reliable resources, such as the Better Business Bureau, and evaluate their credible reviews to inform your decision."
Debt Consolidation Loans
One popular strategy for managing multiple debts is through debt consolidation loans. Debt consolidation loans allow borrowers to combine multiple debts into one. These loans can be secured or unsecured. Unsecured personal loans are an option for individuals with excellent credit, offering interest rates as low as 5.85% (Experian, 2023), and fixed terms of three to five years, providing a clear timeline for debt repayment.
For those with less-than-perfect credit but some home equity, secured loans such as a home equity line of credit or a home equity loan might be more suitable. The national average interest rate for a $30,000 home equity loan is around 4.74% (Federal Reserve, 2023). Comparing these rates with existing debt interest rates can help determine if a consolidation loan can lower monthly payments and overall interest costs.
Balance Transfers
Transferring high-interest credit card balances to a new card with a lower interest rate is another effective debt management option. Balance transfers can provide significant savings on interest payments and some cards offer 0% interest on balance transfers for up to 18 months, making it easier to pay off debt faster for those with good credit and the available capital to pay off the balance over the promotional period fully. However, it is important to know that the interest rate can increase significantly once the introductory period ends.
Alex Kleyner advises, "Balance transfers can be a valuable tool if used correctly. Make sure to pay off as much of your debt as possible during the promotional period to maximize savings and avoid high interest rates once it ends."
Debt Management Plans
A debt management plan involves working with a consumer credit counseling agency to create a plan tailored to the individual's financial situation. The agency submits plans that are either approved or disapproved by the creditors. Although this may lead to the closure of credit accounts, the plan typically takes four to five years to complete and can significantly reduce financial stress. In some cases, the debt management plan will re-age the accounts, which can positively affect an individual.
"A debt management plan can offer a structured and supportive path towards financial stability, helping individuals not only manage their debts but also learn valuable budgeting skills along the way," Alex Kleyner emphasizes.
Bankruptcy
When other options are exhausted, declaring bankruptcy can provide a fresh start. If an individual is considering bankruptcy, they must consult with an attorney to understand if it will help their situation and to learn about all the benefits and risks.
Chapter 7 bankruptcy, the most common type, discharges most unsecured debts, including credit card debt, personal loans, and medical bills. However, it does not cover secured debts like auto loans or mortgages, nor does it discharge alimony, child support, past-due taxes, or student loans. The process takes about four months and can cost between $350 and $500 (U.S. Courts, 2023).
Declaring bankruptcy should be viewed as a last resort due to the requirements and its long-term impacts. It can also significantly impact an individual's financial state for years, on average 7 to 10 years, and may result in more future hurdles when seeking financial assistance for major purchases, such as buying a car or home.
After all this, there's a possibility that an individual still will not be able to pay their creditors in full after declaring bankruptcy. Filing for bankruptcy also does not mean a person will qualify, there is a risk of paying upfront costs to file but not be approved, leaving some consumers struggling to find alternative solutions to pay off debt. It is highly recommended individuals ask about their approval odds before committing to upfront payments or retainers wherever possible.
"Facing financial difficulties can be overwhelming, and declaring bankruptcy shouldn't be taken lightly. While it's a valuable tool for debt relief, it deserves thoughtful consideration and legal counsel," says Alex Kleyner.
Each of these debt relief options has its benefits and drawbacks. It is crucial to thoroughly research and choose the program that best aligns with individual financial needs and goals.
CONTACT:
Andrew Mitchell
media@cambridgeglobal.com
SOURCE: National Debt Relief
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