10 surprising myths about debt relief programs

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10 Surprising Myths About Debt Relief Programs Are you stressed out and drowning in debt? If you are, then you should know that debt relief is the secret to a happier life. Debt relief programs will help you create a structured plan that will get you out of the debt situation that you are wallowing in. The question is what program will you choose? (Continued ...)

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While the main challenge is in the journey, you can set yourself up to succeed or fail through the plan that you will use to get yourself out of debt. Some people think that they can pick just any program from a list. That is not true. You need to make your choice carefully. You have to understand each and every one of your options so you can see which of them will suit your specific needs best.

10 debt solutions myths

The debt relief programs you can choose from include debt consolidation loans, credit counseling, debt management, debt settlement and bankruptcy. All of these can get you out of debt. However, they follow different processes. Instead of defining them one by one (which you can do by browsing through our pages here at National Debt Relief), we will give you 10 myths that commonly confuse people about them.

Myth 1: Credit counseling and debt management are the same.

Simply put, debt management is just a part of credit counseling. While these can mean two different processes, credit counseling is the more important one. You can get credit counseling without debt management, but you cannot do the latter without going through the former. Credit counseling involves a credit counselor that will help you create a structured plan to solve your debt problem. Debt management is one of the processes that can be used to actively take part in your debt payments.

Myth 2: Debt management can lower the amount of your debt.

Some people think that debt management can lower their overall debt amount when in truth it does not. What this program does is create a debt management plan that will stretch your current balances over a longer payment period. This results in a lower monthly contribution. But if you total the amount that you have to pay, it is still the same.

Myth 3: A debt consolidation loan will save you money on interest.

Debt consolidation loan combines your debts into one new loan. Getting a low interest loan that can be used to pay off your multiple high interest debts does this. While you will aim for a low interest loan, you have to understand that you will be stretching your debts over a longer payment period. If you compute the low interest amount over a longer period, that can end up being more costly than if you were to stay with your current high interest rate. The longer your payment plan, the more you will pay in interest.



Myth 4: You cannot get a debt consolidation loan without collateral

As mentioned the aim of debt consolidation loan, just like all the other debt relief programs, is a low interest rate. If you get a loan to pay off your debts, a secured loan that requires a collateral will yield the lowest interest rate. But that does not mean this is your only option. You can use debt consolidation loan even if you do not have anything to use as collateral. For example you could get a personal (unsecured) loan but you will need a good credit score to get a low interest on that loan.

Myth 5: You'll get better results with a debt settlement company.

This actually depends on you. Debt professionals are trained experts but this does not mean you cannot accomplish what they can do. Some people have actually gotten out of debt through their own efforts. But if you know that you cannot do it on your own, then hire a professional. You just have to be careful about who you will trust with your debt problem. FTC.gov, the website of the Federal Trade Commission, reveals that the most reputable of the credit counselors usually come from non-profit organizations. They can offer their services through phone, online or personal meetings.

Myth 6: Debt consolidation and debt settlement are the same thing

Another myth about debt relief programs involves the confusion between debt consolidation and debt settlement. These are two different programs. The first involves combining your debts under one easy payment plan. The other, debt settlement, is mostly about debt reduction.

Myth 7: Debt settlement is the quickest way out of debt.

This actually, may or may not be true. Debt settlement involves negotiating with your creditors to allow you to pay off only a portion of your debts because you are in a financial crisis. If they agree immediately and you have the money to pay the debt in lump sum, then you will get out of debt faster than you think. But if they drag it out because they do not want to agree to your settlement proposal, it will take longer to become debt free.

Myth 8: Debt settlement is always better than bankruptcy.

A lot of financial experts will tell you to choose debt settlement in order to avoid bankruptcy. Both of these options will give you debt freedom but at the cost of your credit score. Between the two, bankruptcy will do the most damage to your credit report.



But even given this there are cases when your financial situation is better off with bankruptcy. Debt settlement will still require you to pay a portion of your debts. If you are really hard up financially and you have no income, bankruptcy might be your best option.

Myth 9: Bankruptcy will eliminate all your debts

Here is another misconception about the bankruptcy procedures. People often think that if you are proven to be financially incapable of paying your debts, you won’t have to pay anything. While you will not have to pay your dues in full, there is still some form of payment involved. If you choose a Chapter 7 bankruptcy, your assets will be liquidated and used to pay off your debt. In a Chapter 13 bankruptcy, you will have a court-approved repayment plan that will require monthly payments.

Myth 10: Bankruptcy can ruin your future.

This is the myth that gives bankruptcy a notorious reputation in the financial industry. While there will be damages to your life and financial records, it is not the end of the world. In fact, some people consider this as starting with a clean slate -- a broken slate but a clean one nevertheless. Bankruptcy does not mean you will be tainted for life. This record will only stay with you for the next 10 years. In fact, you could find yourself able to get a loan in a few years time - at least if you take care of your credit during this time.

How to choose the right debt relief program

Now that we have cleared up these myths, let us help you make the right choice. Debt relief programs are effective but you have to choose the right one. Here are 4 important questions that you have to ask yourself.

• What type of debts do you have? The first question that you need to ask yourself involves the type of debts that you owe. According to the NewYorkFed.org, the top debts by the end of 2013 include mortgages ($8.58 trillion), student loans ($1.08 trillion), auto loans ($0.86 trillion) and credit cards ($68 trillion). The debt relief programs discussed in this article can usually resolve credit card debts. However, the other three are not the same. For instance, in bankruptcy, student loans cannot usually be eliminated. Debt consolidation loan can typically help with all of these credit accounts. Understand the type of debts that you owe so you will know the right program for your financial needs.



• How much can you afford to pay every month? Start by using a budget plan before you choose a debt solution. If you can afford to pay the whole debt, you could opt for debt consolidation. If your income is lower than before, you need debt reduction and that involves debt settlement or bankruptcy.

• Do you have a steady income coming in and can you grow it? If you can increase your income, at least until you have paid off your debts, you may not have to opt for debt settlement or bankruptcy. That way, your credit score would remain intact when you achieve debt freedom. But if you know that your financial situation will not improve soon then it may be best to consider debt reduction.

• What are you willing to sacrifice to gain debt freedom? Lastly, you may want to ask yourself what you are willing to give up to achieve debt freedom. It can be your credit score or your time. If you don’t mind having your score lowered, then opt for debt settlement or bankruptcy. If you don’t mind sacrificing your time, just work longer hours or get a second job and choose debt consolidation.



Does this sound familiar?

• You are tired of worrying about money…• You are losing sleep due to mounting credit card debt…• You are fighting with your partner about the bills…• You are living paycheck to paycheck…• You are falling behind on your debts…• You are losing hope…

It’s time to talk with National Debt Relief!

Call 1-888-703-4948Or go to http://www.nationaldebtrelief.com





10 surprising myths about debt relief programs

Economy & Finance