Truths and Myths about Debt Relief

Make sure you understand the ins and outs of debt relief. Read our article that exposes the myths and reinforces truths about debt relief that might help you become debt free.

Consumers should be very cautious about debt matters particularly during times of financial volatility. It is difficult to get out of debt especially when times are quite unstable. One of the first things that most people think of is how to cope with credit card payments and settle loan obligations. When things get out of hand, your first option will be to look for debt relief programs. There are various companies engaged in this enterprise but you have to be discerning in choosing your provider. Be a smart borrower and find out about the TRUTHS and the MYTHS about debt relief so you avoid being victimized by scheming companies or individuals.

The Myths

Do not be swayed by sweet talk and false promises!

  • There is a chance for debtors to cut down outstanding balances by as much as 50% of the aggregate debt. No lender or financial institution will be agreeable to this arrangement. It is highly unjust to the creditor. A more realistic figure would be about 30%. Other lenders may agree to reducing interest rates or put aside miscellaneous fees.
  • All debt consolidation companies are trustworthy. Unfortunately, there are scam artists who are only after the money of consumers. Refrain from depositing the money in the accounts of these firms since such accounts are not covered by the Federal Deposit Insurance Corporation. It is possible that unscrupulous companies will just run away with the money of clients. Likewise, do not be convinced to pay upfront fees since this is not the legitimate practice.
  • Credit scores of borrowers are secured. Those engaged in debt management services must inform clients outright that settlement plans do not affect credit scores of consumers. The truth is missed and delayed payments affect credit standings of consumers.
  • Creditors easily say yes to proposals of debt settlement. Lenders are not mandated by state or federal laws to accept settlement propositions from debtors.
  • Credit card debt can be resolved without any fees. Any third party involvement in consolidating credit card debt entails minimal service fees. However, you will not incur any costs if you decide to work this out personally. There is a proper procedure in debt negotiations.

The Truths

Debt relief options are possible if you encounter problems in debt repayment. You can eliminate these financial obligations by paying less than the original amount. However, it is important to understand well the choices available to you.

  • It is not likely that you can pay off and lessen the amount of all your liabilities. All that you can resolve are utilities, credit card bills, hospitalization, and behind schedule house rentals.
  • You have to take part in a debt relief program or enter into negotiations with your lenders to take away a percentage of your unpaid loans. The best way is for you to reduce the loan balance by 40% but this will take a very long process. Chances are lending facilities will only allow a small amount to be deducted.
  • It is not imperative to seek professional assistance from debt consolidation companies for debt reduction. You can negotiate with these companies personally so you need not pay extra fees.
  • Do not expect that all of your creditors will agree to your proposal. It will take a lot time and discussions before this is achieved.