Many credit card issuers and lenders have been offering short term payment deferments to provide some temporary help to those impacted by the pandemic. Unfortunately, this is not enough for many people who need much more support to resolve high-interest debt problems. While there may be government-mandated help for student loans and some mortgages, there is no bailout for credit card debt and personal loans. Most people want to avoid a damaging and often costly bankruptcy but might not understand the difference between debt consolidation loans, consolidating with credit counseling, and debt settlement.
Debt Consolidation Loans:
Consolidating debt with a new loan is not a viable solution for people whohave too much debt and are experiencing financial hardship. For those who qualify, they may provide a reduced interest rate compared to high-interest credit cards. Depending on your existing interest rates and your new rate, your debt consolidation loan payment may or may not be lower than what you are currently paying. Suppose you have a good debt-to-income ratio and good credit scores of 720 or better. In that case, Debt Redemption Texas Debt Relief recommends applying for a debt consolidation loan with your primary bank where you have your checking and savings accounts. Find out if your bank will offer you a low-interest loan to pay off your high-interest debt. Other options are Peer-to-Peer lenders such as Lending Club, which you can apply online. Lending Tree is another option in which banks and lenders provide offers through the platform so you can choose the best offer. If your credit scores are not at least 720 or the amount of your total debt payments compared to your income is too high, you may find it impossible to obtain a low-interest debt consolidation loan anywhere. If this is the case, there are two other options to consider depending on your financial situation.
Traditional Credit Counseling:
If you cannot qualify for a debt consolidation loan and current or no more than six months delinquent with your credit cards, a credit counseling debt management plan may be a viable option. By consolidating your debt in this method, you will make one payment per month, and the credit counselor will distribute it amongst your creditors. The advantage of this type of consolidation is that the interest rates can be reduced, often to less than 10%. Another advantage is a relatively short 5 to 7 payoff period depending on what you can afford monthly. Depending on your initial interest rates and your credit counseling program length, your consolidated monthly payments may be lower than your previous minimum payments. Even though you are still paying some interest in a credit counseling program, you may save a lot of money in interest, and it will shave many years off the time it would take to pay the debts off compared to making minimum payments. These advantages come at a cost that may or may not be important to you. After enrolling in credit counseling, all your enrolled accounts will be closed. If you have good or even decent credit scores, they take a hit after enrolling. If your credit scores are poor, then this is likely not a concern. After enrollment, your creditors will also note that you are in a hardship plan on your credit report, which will make it nearly impossible to obtain new loans while in the program. Of course, you should not be acquiring new debt if you are struggling to pay the debt you already have. Most major creditor card institutions work with credit counseling agencies, but some installment loans will not qualify or will not experience any rate reduction. Credit counseling agencies charge a monthly fee and are provided compensation from the lending institutions for collecting the debt in what is referred to as fair share.
Also called debt settlement, is another method of resolving debt that has gained popularity because of the enormous potential savings. In some cases obtaining debt relief through debt negotiation programs can cost less than a Chapter 13 bankruptcy. Debt settlement can be ideal for many people struggling financially, are behind in making their payments, or expect that they will fallbehind soon. Research has shown a higher economic benefit for clients who complete debt settlement programs than traditional credit counseling. Debt settlement programs are usually structured to resolve debt between 2 to 4 years but sometimes stretch to 5 years, depending on what is affordable monthly. The monthly cost has the potential to be less than half compared to making minimum payments and often much less when compared to a credit counseling program with a similar estimated length toresolve the debt. While credit counseling can negatively impact credit scores, so can debt negotiation. Your scores may even drop more compare to credit counseling because you will not be making monthly payments. Whether enrolled in any debt relief program or not, credit scores are negatively impacted when you do not make at least the minimum payments. Debt negotiation programs do not make monthly payments to your creditors, but if you are already behind with your payments, the worst of the credit score damage may already be done. At that point, the focus should be resolving your debt as quickly as possible so you can start rebuilding your credit scores as soon as possible. Since a debt negotiation program may be completed years sooner than a credit counseling program offering the same monthly cost, you may be able to start rebuilding your credit scores much faster by settling your debt.
Companies providing debt negotiation are not allowed to charge fees until they settle an account, and the settlement fees must be proportionate to the enrolled amount of the creditor settled. While in a debt settlement program, the monthly program payments accrue in a Special Purpose Account, which is essentially a savings account to build up funds to settle with your creditors and cover the negotiation fees. There is no quick and easy way to resolve debt if you do not have the funds to pay it off, so like other methods, there are few potential drawbacks of using debt settlement as a method of debt relief. The program length will always be an estimation that could be longer or shorter, depending on actual settlement amounts. The settlements could be higher or lower than estimated initially, but the estimation should be realistic and based upon a company's historical settlements with your enrolled creditors. Some non-reputable debt settlement companies may quote numbers that are unrealistically low in attempt to get you to sign up with them.
After a debt is settled, a creditor could send you a 1099-C for the forgiven amount, meaning the forgiven portion could be considered taxable income. If this occurs, filing an IRS tax form 982 with your tax return may prevent you from paying income taxes on the forgiven debt. A tax advisor would be able to advise and assist in filing the form if needed. Also, debt negotiation companies themselves cannot stop creditors; attempts to collect until the debt settles. Creditors may call you, and there is a possibility a creditor could file a lawsuit against you in an effort to collect a debt before a negotiated settlement. Most debt settlement companies offer an optional pre-paid legal type of insurance provided by a third-party that may be able to assist in finding and hiring an attorney to help you if a creditor filed a lawsuit.
Debt redemption Texas Debt Relief is not a national debt relief company but rather a Texas debt relief company razor-focused on helping Texas residents to resolve often $30,000, $50,000 to $100,000 more of credit card debt and personal loans. They offer Texans both traditional credit counseling and debt negotiation. Because Debt Redemption only focuses on helping Texans with personalized service, they have developed an exclusive relationship with a highly awarded defense attorney who is possibly the best in Texas. The separate legal services are entirely optional and not required to use their services to negotiate debt. If you choose to hire the law firm in addition to Debt Redemption, then the attorney can enforce specific Texas consumer protection laws in the Texas Finance Code. By having an attorney deal with creditor harassment, their clients can receive peace of mind that removes a lot of the stress that would otherwise be very stressful. The Texas protections enforced are in addition to federal laws that most other states do not offer.
Furthermore, the optional legal representation is proactive and helps prevent creditors from filing lawsuits while debt is negotiated. All your enrolled creditors will know you will have retained an experienced debt defense attorney upfront making it much less attractive for creditors to use litigation. If needed, the attorney will provide legal representation to help defend a lawsuit if one were to occur still. Knowing who your attorney is upfront and having upfront preventative legal representation provides a much higher level of protection than companies reactionary "pre-paid legal" type services, which will try to find you an attorney after a lawsuit is filed. Many Texans also chose Debt Redemption Texas Debt Relief because their settlement fees are much lower compare to most other companies. If you are considering another debt relief company, call and ask about Debt Redemption's lowest fee guarantee. The law firm will offer their legal services to Debt Redemption's clients at an affordable rate.
By choosing both the optional legal protections and Debt Redemption's debt negotiation services, your total cost may be competitive to companies only offering negotiation services, or pre-paid legal plans. Debt Redemptions unique arrangement with the law firm also allows them to affordably assist new clients who have pre-existing creditor lawsuits and judgments.
Debt Redemption Texas Debt Relief offers special programs for those impacted by COVID-19 with program payment deferments available in many cases. If you live in Texas and have questions about debt consolidation, debt relief, or debt settlement, speak with a Texas Debt Specialist at Debt Redemption Texas Debt Relief. For a free and no-obligation consultation, call 800-971-4060 or visit https://debtredemption.com
Debt Redemption Texas Debt Relief Headquarters:
40 NE Loop 410Suite 408San Antonio, TX 78216Phone: 800-971-4060debtredemption.com