You may have heard of debt resolution programs before, but are they right for your financial future? Much of this answer depends on the types of debt you have, your credit score, and your ability to pay your monthly payments on time.
While unsecured debt can be addressed with debt resolution, most secured debts cannot. In this article, we’ll cover the various aspects of debt resolution programs, along with the pros and cons, so you can decide if one is right for you.
Is Debt Resolution a Good Idea?
Whether or not debt resolution is a good idea comes down to numerous factors — it’s certainly not a one-size-fits-all solution. For some people, debt resolution could be the most beneficial step they ever take toward financial freedom.
For others, it might be the least efficient method of becoming debt free. Let’s look at some reasons why debt resolution might or might not be a good idea for you.
Pros of Debt Resolution Programs
Debt resolution programs can make it easier to become debt free by combining multiple debts into a single payment. One scenario where this could be helpful is when you have high-interest revolving debt such as credit cards.
This interest can grow to the point that the interest charges alone are too much for you to pay each month. This makes it next to impossible to bring your balance under control. So what are some top pros of debt resolution programs?
Resolution of Credit Card Debt
Debt resolution services can improve this situation by stopping the negative cycle of compounding interest charges. When your credit cards have high balances, you’re paying hundreds of dollars every single month just for the interest charges. If you add late penalties and over-the-limit charges on top of this, your balance can spiral out of control quickly.
The resolution of credit card debt is one of the top benefits of debt resolution. Companies like Alleviate Financial can negotiate with credit card companies on your behalf to put a halt to high fees and interest through the debt resolution process.
Resolution of Debt Collections
Debt collectors can acquire all sorts of debt. Credit card debt is one of the main types of collections, along with medical debt. These debts can make a massive impact on your credit scores and your ability to get the best interest rates from your current credit card companies. The result is a downward financial cycle that gets worse with time.
Debt collection agencies only pay pennies on the dollar for your debt. That means debt resolution services can help tremendously with negotiating reductions in your collection account balances.
Often, calls from debt collectors include the threat of legal proceedings. This makes dealing with debt collections a top priority for improving your financial position—one reason debt resolution is a great option for some.
Cons of Debt Resolution Programs
Although debt resolution programs come with many benefits for the right financial scenarios, there are some times they fall short. For starters, not all types of debt are eligible. Student loans, home loans, and auto loans can’t be included in debt management plans.
Also, some people might simply be able to take advantage of balance transfers for better interest rates. Others might be able to get lines of credit on their home to help reduce their high-interest credit card debt.
Beyond alternatives for those with excellent credit, what are some cons of debt resolution programs?
Credit Card Companies Don’t Have To Agree
Unfortunately, credit card companies don’t always agree to debt resolution programs. The fact is, they are under no legal obligation to agree to debt resolution program offers. Instead, credit card companies could threaten legal action, sending your account to collections, or garnishing your wages through court. This is one reason why self-help debt relief proves challenging for many.
However, if your circumstances are dire and your ability to pay has been compromised, they would far rather get a smaller payment instead of nothing. Debt resolution specialists at Alleviate Financial have dealt with the vast majority of credit card companies already. We have more experience making the strongest case for your debt resolution based on how each creditor typically responds.
Does Debt Resolution Hurt Your Credit?
When it comes to the actual process of debt resolution, there is a phase where funds must be built up to have a lump sum of money to negotiate with. This usually requires a pause on payments that are instead diverted into a special savings account. Because of this, credit scores might take a dive temporarily. But, remember, the goal is paying down debt, not getting into more of it. Therefore, having a high credit score is an objective that must come later on in order to become debt-free sooner.
Typically, the debt resolution process can resolve your debts and help you recover your credit scores in about a 2-3 year time frame. This will vary, of course, depending on your actual debt, making timely payments, and the rates on debts in the program.
Additionally, if you have other monthly debts that aren’t in the program, your scores might not take as big of a hit. When you maintain on-time monthly payments to creditors for your current debts, it goes a long way in keeping credit scores high.
Get Relief From Overwhelming Debts With Our Debt Resolution Experts
When credit cards, debt collections, and unsecured debt are growing beyond your ability to pay, the potential risks to your finances are high. Your credit history could suffer, hurting scores with the credit bureaus, and making it difficult to get the best loan terms.
Alleviate Financial can help by negotiating with your individual creditors on your behalf. Our debt experts will work tirelessly to slash late fees and excessive interest charges. As a top-rated debt resolution company, Alleviate Financial has the deep knowledge and industry experience to compose the perfect debt resolution plan for your financial future.
Give us a call today to learn how our free debt analysis can help you become debt free in less time.
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