All you need to know about Debt relief

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If you’re in debt, and repayment seems like an insurmountable task, then it’s probably time you considered debt relief. Debts, coupled with their interests and time limits can overwhelm even the best of us. In this situation, getting relief can go a long way in restoring balance to your finances.

Debt relief is the adjustment of the debt repayment agreement in order to ease the borrower’s burden. It can take a good number of forms but the end goal is to provide a solution to the anxiety that comes with inability to repay debts.

While debt relief may sound very comforting to borrowers, this option is not right for everyone. It has its disadvantages such as damaging your credit score. You may even have to repay more than you initially owed if you fail to complete your debt relief program. You should also note that debt relief does not always translate to complete debt forgiveness. So, you still have to cut your expenses and follow a strict budget. Relief is not an excuse to spend extravagantly.

If you meet the following conditions, then you can give debt relief a strong consideration.

1. You’re struggling financially and can only repay your debt if your current repayment plan is reviewed. However, you must be able to repay with new terms and conditions.

2. Your unpaid debts are more than a substantial amount of your income.

3. Your debt is not so much that repayment is not feasible. In fact, it is easier to come up with a new plan with your creditor if the amount you owe is low.

4. Your credit score must be above average.

Types of debt relief

Owing is stressful. Being unable to pay your loans will double that stress. Fortunately, there are a few ways debt relief can help you get out of the financial rut. Here are different types of debt relief and how they can be employed.

• Debt settlement: This is when the amount you owe is reduced by a reasonable amount so you pay less than you really should. This does not happen very often as creditors do not have to help you in this way. A disadvantage of debt settlement is that it damages your credit score for some years. You also have to make lump sum payments.

• Debt consolidation: Although this method does not reduce the amount you have to pay, it may help in reducing the interest rate. All your debts are consolidated into one account allowing you to make a fixed payment to one account that services them. This helps in paying off your high interest loans to prevent accumulation.

• Debt management: Here, the interest rate and the monthly repayment are both reduced to a level that will be convenient for you to pay.

• Extension of payment term: Your creditor can choose to increase the number of repayment years for the debt. This reduces the monthly payment as there is more time to repay. Sometimes, creditors allow you to go a few months without paying so you can get your finances in order before repayment continues.

Final thoughts

If you have made the decision to opt for debt relief, do well to do a bit of digging on the types mentioned above so as to determine which will work for you. You can also employ the help of a credit counselor who has professional expertise in the field.

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