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Your Guide To Debt Relief & Financial Freedom

Getting Started: Taking Control of Your Financial Future

Congratulations again for taking the first step to become debt-free! The first step in accomplishing anything is often the hardest, so we really do mean it when we say "congratulations!"

We understand many people get into debt, for a variety of reasons, often through no fault of their own. Whether due to loss of job, reduction of income, medical bills, or personal or family hardship – credit cards and other unsecured debts can quickly begin to rule your life.

The good news is, regardless of your current situation and what you're going through – help is available to you – and you're not alone. There are caring debt relief specialists who can take the time to listen to you, understand your situation – then review your debt relief options and show you the way to a debt-free future.

Getting Out of Debt: You Can Do It!

“The good news is, regardless of your current situation and what you're going through – help is available to you - and you're not alone.”

So, let's get started. The first thing you need to know about debt relief is the following: While debt relief programs have helped many individuals and families get out of debt at an accelerated pace and save money, in some cases, thousands of dollars – achieving success in these programs really does begin with you, and in believing what you can achieve.

The fact is, the principles of debt relief are remarkably simple and effective. While debt relief doesn't make debts magically "go away" – once you understand how debt relief works and what you can do, month after month, to create a debt-free future, you may just feel like a huge weight has been lifted right off your shoulders.

Imagine how your life would change if high interest debt became a thing of the past, and imagine how great it would feel to put your hard-earned money to work for you and your family – not the credit card companies or their shareholders.

Your Path to Financial Freedom

So, what does it take to enjoy a life of financial freedom?
Develop good spending and budgeting habits to avoid becoming captive to the credit card "plastic promise" of "buy now, pay later".
Get rid of existing high-interest debt as fast as you can.
Will debt relief help you? How much could you save? Get your free debt relief savings estimate

Sound way too simple? It's the plain old-fashioned truth and it really is the secret to a life of financial freedom! What's more, once you stop the pattern of being captive month after month to high interest credit card debt, the exciting part really begins:

That's the process of taking the money you used to send to credit card companies and instead setting it aside and putting it work where it belongs – to build long-term security and wealth for you and your family.

So How Do Relief Programs Work and How Do You Qualify?

If you do find yourself with credit cards and other unsecured debts that have become more than you can handle on your own, the good news is, there are several debt relief options available to you that can not only help you get out of debt as quickly as possible – but potentially save you a substantial amount of money as well.

Of course, one of these options is bankruptcy, which can remove the burden of debts and provide a new financial lease on life. However, bankruptcy is generally considered the debt relief option of last resort, and, before proceeding, it should be carefully considered with the help of a financial or legal professional. Why? Because it is the option that has the most serious and long-lasting effect on your personal credit, your ability to obtain credit, and your financial future.

Credit Cards and Unsecured Debts Qualify for Relief

The good news is, high interest credit cards are considered "unsecured debts" and these are the types of debt that "qualify" for relief.

If you are living paycheck to paycheck, falling behind on payments, or just barely making minimum credit card payments each month – chances are you're experiencing a financial hardship and in need of relief. The good news is, high interest credit cards are considered "unsecured debts" and these are the types of debt that "qualify" for relief.

Simply put, unsecured debts that qualify for relief under debt relief programs aren't "secured" by collateral. Qualifying debts are credit cards, store cards, gas cards, medical bills, doctor bills, cell phones, and more. Debts that generally do not qualify under debt relief programs are home mortgages, auto loans, or other debts that are actually secured or backed, by the asset itself, or another asset of value. It is important to note that that, for those struggling to make home mortgage payments, certain types of bankruptcy may offer a safety net, in addition to financial assistance programs offered to homeowners under government programs.

Why Would Credit Card Companies Agree to Give Consumers a Break?

Before we provide an overview of the various debt relief options available to you, it is important first to understand why credit card companies would be willing to offer consumers a "lifeline" by agreeing to reduce interest rates, waive late fees and penalties, or even settle debt for substantially less than is actually owed.

The answer is quite logical: When consumers who are genuinely facing a personal or financial hardship fall behind in payments by 30-60-90 days or more, this may be a sign that the consumer is in danger of defaulting entirely on their debt and possibly facing the real prospect of bankruptcy. In this scenario, credit card companies often decide to "sell off" what is termed as "bad debt" to a third party collector for much less than the actual debt – often as little as ten cents on the dollar.

It stands to reason then that credit card companies, and other debtors, may be more than willing to work with consumers in need of debt relief, allowing them to resolve debts for what they can reasonably afford – rather than collect little or nothing at all if the consumer is forced into bankruptcy.

Debt Management and How It Can Help You Reduce Debt and Save Money

One of the most popular debt relief options is "Debt Management", which also may be referred to as "Debt Consolidation." The benefit of a debt management plan (or DMP) is that it helps you combine or "consolidate" all of your high interest credit cards and other unsecured debts into a single more manageable payment each month – which can lower your payments and save you money. Under debt management plans, you would typically agree to stop accumulating additional credit card debt with the goal of paying off existing debt at a much lower interest rate.

Debt management plans are typically coordinated by credit or debt counselors who speak with consumers to get details on their financial hardship. These counselors aren't "judging" or criticizing consumers. They are caring debt counselors who understand that virtually everyone gets into debt at one time or another and they just need a helping hand. So debt relief specialists will take the time to listen and understand each person's situation, asking questions like: how much debt do you have, what types of debt, have you fallen behind, are you going through a personal or financial hardship that credit card companies need to take into consideration?

“The benefit of a debt consolidation via a debt management plan is that it can provide you with a set plan to get you out of debt at an accelerated rate”

These are all types of questions that provide the information needed so that debt counselors can put together a personalized debt relief plan that is customized according to the unique needs and budget of each individual or family.

Once the debt management plan is put together, proposals are then sent out to each creditor – requesting that creditors agree to lower interest rates, waive fees and penalties, or even offer more favorable repayment dates and terms. Those creditors who agree to the proposals are then "added" to the debt management plan that is put in place for the consumer.

The benefit of a debt consolidation via a debt management plan is that it can provide you with a set plan to get you out of debt at an accelerated rate – a plan and timetable that can help to immediately remove pressure by lowering monthly payments, reducing interest rates, and waiving fees and penalties.

"How Can I Pay Less Each Month But Still Get Out of Debt Faster?"

Many people wonder how they can actually get out of debt much faster, while actually paying less money to creditors each month. The answer is very simple: Once you stop using credit cards and ringing up additional debt and begin to pay off existing debt at much lower interest rates – the time required to get out of debt is greatly reduced and the amount of money you can save (compared to paying credit card minimums for years and years) can be very substantial – in some cases thousands, or tens of thousands of dollars!

Will debt relief help you? How much could you save? Get your free debt relief savings estimate.

How Debt Settlement or Debt Negotiation Works

Another increasingly popular debt relief option is debt negotiation or debt settlement. While the goal of debt consolidation or debt management is to pay back all of your debt, just at a much lower interest rate. The goal of debt settlement is to "settle" credit cards and other accounts for much less than is actually owed. Especially if you have high-interest credit cards and find yourself going nowhere on a treadmill of high credit card balances – debt settlement may be the best debt relief alternative to bankruptcy.

“The goal of debt settlement is to "settle" credit cards and other accounts for much less than is actually owed.”

With a debt settlement program, consumers in hardship typically stop making monthly minimum credit payments and, instead, begin to direct funds each month into a separate "set aside" account. Once a reasonable amount of money is accumulated in a settlement account, debt negotiators then have the funds necessary to make a "lump sum" settlement offer to a creditor.

As compared to facing the hardship and very long road of trying to pay off high balance credit card debts via minimum payments month after month, year after year – the concept of taking existing credit card debt, stopping it in its tracks, and settling debt as quickly as possible has become increasingly popular. This is especially true for consumers in hardship who want to offer what they can afford to credit card companies – rather than default entirely on debt and face bankruptcy.

Why Has Debt Settlement Become So Popular?

For those with high balance credit cards, debt settlement has become an increasingly popular alternative to other forms of debt relief – including bankruptcy. There are several reasons for this. One is certainly the substantial amount of money that can be saved by "settling" debt. In addition, new bankruptcy laws have made it more and more difficult to qualify for bankruptcy and many consumers want to do their best to pay what they can reasonably afford. Finally, new laws are in place to protect consumers who use debt settlement services. In fact, debt settlement companies are no longer allowed to accept upfront fees. In fact, no fees may be collected for debt settlement until at least one debt is resolved or settled. This gives the consumers the protection and peace of mind they need – knowing that unless they are successful at settling debts, they will not be charged.

While debt settlement can save a substantial amount of money, it is important to understand that the amount of money consumers save through debt settlement is subject to federal taxes. In addition, due to defaulting on payments, debt settlement typically will have a negative impact on credit – but not near as severe or long lasting of an impact as bankruptcy. Finally, when consumers default on credit card agreements in order to "set aside" funds to make a settlement offer – credit card companies may threaten, or take, legal action. Regardless, credit card companies who understand the circumstances of consumers in hardship are often quite willing to accept a "reasonable" settlement offer.

Will debt relief help you? How much could you save? Get your free debt relief savings estimate.

Do-It-Yourself Debt Relief for Financial Freedom

Regardless of whether you take advantage of a proven debt relief option or decide to get out of debt all on your own, there are some very important things you can do to help you "stay the course" and be successful.

Here are 7 debt relief tips you can practice on your own:

  1. Create a realistic spending plan – a personal or family budget
  2. Set aside money each month to pay down your existing debt
  3. Stick with your plan. Avoid unnecessary "impulse" purchases
  4. Contact your creditors requesting lower interest rates or to settle debt
  5. Pay down debts one-by-one, starting with highest-interest debt
  6. Don't use credit cards! Use a debit card to stay on track
  7. Avoid taking out additional loans that add to your debt

How to Improve Your Credit Standing and Credit Score

For many people in debt, the most important thing is to take control of finances and get off the debt treadmill as quickly as possible. Once you go through the process of debt relief to reduce or eliminate debts, it's important to move forward with the goal of using credit responsibly. And, when you do this, credit scores will typically increase – and often much sooner than you might imagine. The fact is, the wise use of credit is an important part of life and a good credit score can save you a great deal of money over your lifetime.

Understanding the factors that make up your credit score (and how they are weighted) can help you understand what you can do to improve your credit score:

Your Payment History
This is a record of your payments to creditors. This accounts for roughly 35% of your credit score. It includes on-time or late payment status. The number of accounts past due, and the length of time the account remained unpaid also factor into your credit score. Your payment history may also show a "public record" on your file such as a bankruptcy, lien, or judgment against you. A positive, on-time payment pattern will help boost your credit score.

Your Amount of Outstanding Debt
How much debt are you carrying? This accounts for roughly 30% of your credit score. Typically, debt balances that are in excess of 50% of your credit limit will have a negative effect on your credit score. If you maintain considerably lower balances (up to 30% of your available credit), this should have a positive effect on your credit score.

Your Length of Credit History
Lenders typically look favorably upon individuals who have a credit history that is well established. Although this only accounts for roughly 15% of your credit score, it still plays an important role in forming your credit score. This may mean that you do not want to close an old account, especially if you're getting ready to apply for a loan. By closing an old account, and reducing the amount of credit history demonstrated on your credit report, you could negatively impact your credit score.

How Much "New Credit" Do You Have?
Applying for too much "new credit" can harm your credit score. This "new credit" category accounts for roughly 10% of your credit score. When you apply for credit and a business checks your credit score, this can cause a "credit inquiry" on your credit report which can lower your score slightly. This is termed a "hard inquiry". Too many "hard inquiries" within a short period of time can be a sign to lenders that you are overextending yourself by taking on too much credit. It is important to note that when you check your credit score, or you receive pre-approved offers in the mail, the inquiry that results is termed a "soft" inquiry and will not lower your score.

What types of credit do you use?
This accounts for roughly 10% of your credit score. Do you have a balanced mix of credit?

Lenders like to see a "healthy" mix of credit (mortgage, auto, installment, revolving, etc) and not an overuse of revolving credit.

Here's to Your Debt-Free Future

In addition to helping you better understand your credit and how to improve it, we hope this guide has provided you with the information you need to make an informed decision regarding your debt relief options.

Regardless of your situation, we want you to know we're here to help you. The articles, videos, and special features on our site are all designed to help you on your road to a debt-free future. We understand that taking on debt, and paying off debt, is often a very necessary part of life – but it shouldn't rule our lives. So, we encourage you to do everything in your power to avoid high interest debt and use your credit wisely for those things that matter most to you and your family.

Walter Burch
Founder
DebtReliefCenter.org

Will debt relief help you? How much could you save? Get your free debt relief savings estimate.