Is Debt Settlement the Right Fit For You?
If you’re drowning in debt and you’re trying to figure out what to do with you debt hopefully this article may be of some use to you. Usually when we’re drowning in debt we have 4 options.
1) Keep up with the minimum payments on your debt.
2) File Bankruptcy
3) Credit Counseling
4) Debt settlement
I say these 4 options because these are the most obvious ways to deal with your debt. (I’ve purposefully excluded “winning the lottery” and “rob the liquor store down the street”). Now depending on the amount of debt vs income they would have to make an educated decision on which of these routes to go. For instance, if you lived a lifestyle where you racked up 100k in debt but you’re making a salary of 30k a year now, bankruptcy might be a good idea for you. On the flip side, if you make $150k a year and have a paltry debt load of $500.00 then you might as well just pay off the debt. Now let’s say for example we have an average consumer who holds the statistical average of $20,000 in unsecured debt making $50-60k a year…Well let’s just weigh out our options:
Scenario: 20k debt load
1) Keep paying minimum payments – I plugged in this scenario at cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp (cnn money calculator) and assuming I have 20,000 debt at 12% interest and minimum payments of $400/month it would take me 24 years before I’m debt free.
2) File bankruptcy – If I file for bankruptcy it will stay on my credit report and haunt me for the next 10 years. It will affect the interest rate I get at least for the next 3 years when I purchase a home as well as when I purchase an automobile.
3)Credit Counseling – Filing for credit counseling will allow me to consolidate all my debts into a single payment at 8% interest rate. The only downside is all my accounts on my credit report will show as enrolled in credit counseling.
4) Debt Settlement – It will allow me to reduce my debt load to about 50% of the initial balance. Downside: my credit will be ruined with some of my accounts going into collections.
Weighing out these options, I personally do not planning on spending 24 years to pay off my debt, nor do I plan on filing for BK and having it haunt me for the next 10 years. This would leave me two choices between Credit Counseling and Debt Settlement. These are actually both good alternatives to bankruptcy however if you do the math you end up saving a lot more money doing debt settlement since I do not get any balance reduction at all out of credit counseling. I know in some cases debt settlement will ruin your credit score while you’re in the program however you would need to weigh the benefits you would get from this program as opposed to going with the 4 other options. In the end when you’re in debt and your back is up against the wall all your choices will not seem exactly favorable. Someone once told me “you steer the wrong way you end the wrong way.” Hopefully this article well help keep you from steering in the wrong direction.
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