Personal loans:Personal loans are for a fixed amount of money from banks, credit unions, and online sources. Average personal loan rates range from 10% to 28%, depending on credit. When rates are very high, early and aggressive debt payoff is important. If rates are reasonable, you may wish to prioritize other money goals before putting extra money toward repaying early.
Debt Settlement is making a deal with creditors to pay less than the total balance owed. As attractive as that sounds, there are some severe penalties, notably to your credit score and tax liabilities. Debt settlement costs include attorney fees (typically 10-20% of amount settled) and taxes owed on forgiven debt. Debt settlement negatively impacts credit for several years.
While maybe not as widely known, this may be the leading non-profit organization to call for debt management plans, help for paying loans, and other credit counseling in western Texas. They can help qualified individuals refinance their debts and pay off outstanding bills over a period of time using DMPs, consolidation, or so called hardship programs. Services are offered in Spanish too.
We typically recommend fixing the rate as much as possible, unless you know that you can pay off your debt during a short time period. If you think it will take you 20 years to pay off your loan, you don’t want to bet on the next 20 years of interest rates. But, if you think you will pay it off in five years, you may want to take the bet. Some providers with variable rates will cap them, which can help temper some of the risk.
Credit limitation: Like a balance transfer, a personal debt consolidation loan is usually only a viable solution for consumers who have a good credit score. The higher you score, the lower the interest rate you can qualify for on the loan. APR of 5% is ideal, but anything below 10% may be enough to provide the relief you need. If you can’t qualify for a rate below 10%, look for other options.
This is a very important first step before trying to start retiring debt. Having an emergency fund will help keep you from getting deeper into debt when unexpected events happen. If, for example, you have $1,000 in cash set aside and your car or house needs a sudden repair, you do not have to put that repair on a credit card. Ideally, you will want to get to the point where you have an emergency fund worth three to six months of expenses so you can support yourself temporarily if you suddenly lose your job, but the $1,000 is a great start.
In a DMP, you deposit money each month with the credit counseling organization. It uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees. But it’s a good idea to check with all your creditors to be sure they offer the concessions that a credit counseling organization describes to you. A successful DMP requires you to make regular, timely payments; it could take 48 months or more to complete your DMP. Ask the credit counselor to estimate how long it will take for you to complete the plan. You may have to agree not to apply for — or use — any additional credit while you’re participating in the plan.
Be VERY careful before you decide go with debt settlement and don’t believe the huge savings you will supposedly get. Lower but stretched payments with higher interest will cost much more on the end. These 30-50% so-called savings are in the fact money going into their pockets. Plus, your credit score will be so screwed up that nobody rent you a bicycle.
In my debt relief practice I am coming across more and more consumers who have used National Debt Relief to help them manage their debts and negotiate settlements on their behalf, only to regret the decision to sign up with National Debt Relief at a later date. With that said National Debt Relief is licensed in the State of Washington and appears to be complying with the Washington Debt Adjusters Act under RCW 18.28 which requires debt adjustors to charge no up front fee’s and limit their fees to 15% of the total debt listed on the signed contract which includes payments for any third party trust accounts used for holding client funds and making disbursements. If a consumer decides to cancel services with National Debt relief and debts are not settled, any funds in a third party trust account must be refunded. Consumers should know that attorneys such as Symmes Law Group, PLLC are exempt from the Washington Debt Adjustors Act and do not need to meet its requirements as attorneys are not considered debt adjustors.
No guarantees. Lenders usually want to work with you, but they can choose not to. This is especially true with debt settlement. You may contribute to the fund used to make a settlement offer for 6-8 months and then find out the lender won’t accept the offer. If you choose this route, be sure to get a written agreement from the lender that they will work with you.
Addresses listed for internet and telephone credit counseling agencies may be outside the requested state or judicial district. In such cases, the credit counseling agency is physically located in another state or judicial district, but is approved to provide credit counseling in the requested state or judicial district. In some states and judicial districts, credit counseling may be available only by internet and telephone, and not in person.
If you're interested in starting a debt management plan, you'll first need to find a credit counselor. The Federal Trade Commission recommends you never agree to any debt management plan until a reputable credit counselor has thoroughly reviewed your financial situation with you. The U.S. Department of Justice maintains a state-by-state list of approved credit counseling agencies, so you can search for someone near you.
No. All eligible unsecured debt must be accounted for in a debt management plan, even those bills that you typically have no problem making payments on. The credit counseling agency in charge of your debt payment plan will want a full accounting of income and expenses in order to arrive at an accurate amount available to make the monthly DMP payments so be prepared to include all eligible debts.