Debt Relief Programs and the Associated Myths

A number of people feel stressed and worried because of the withstanding debt that they have. However, people can now get rid of all the withstanding debt easily as a number of debt relief programs have been introduced. Debt relief programs are considered to be the secret of a happy and stress-free life. These programs help in creating structured plans that will be responsible for pulling you out of your debt situation. The main question that arises is the kind of debt relief program that you are going to choose on the basis of your requirements. You also need to know that you cannot just pick up any program. Your choice has to be made extremely carefully on the basis of the needs that you have. Debt relief programs include credit counseling, debt consolidation loans, debt settlement, bankruptcy, and debt management. All of them are known to follow processes that are completely different from each other. There are certain myths revolving around each one of them that are known to confuse people to a great extent.

Given below is a list of the myths that you have to consider and understand the reality behind them.

Debt management and credit counseling are the same

You need to understand that debt management is nothing but an important part that is associated with credit counseling. It is true that both of them definitely are processes that are completely different from each other, but you have to know that credit counseling is considered to be more prominent. You will be able to get proper credit counseling without including debt management but you will not get debt management without considering the process of credit counseling. Credit counseling normally involves credit counselors, who are responsible for helping you to create structured plans for solving credit problems. Debt management, on the other hand, is a process that can be used for taking part in all the debt payments.

Debt management is responsible for lowering the total debt amount

Most people have the idea that debt management is responsible for lowering the total withstanding amount that they have to pay to their creditors. However, the truth is that it is not responsible for lowering the complete amount. This program is responsible for creating a proper plan, which will help in stretching the current balance that you have to a long payment period. This, in turn, is responsible for a low monthly contribution. However, you still have to pay the total amount and that does not change.

Debt consolidation loans help to save money on the rate of interest

When you are choosing a debt consolidation loan, you are actually allowing combining all your debt amounts under one single lender. This is normally done by taking a loan that comes with a low rate of interest, which will be used for paying the numerous debts of high interest. When you are considering the loans with low rates of interest, you need to keep in mind that you are actually stretching the debts over longer payment periods. You also have to understand that if your payment plan is extremely long, you have to pay more amount of money towards the rate of interest.

Professionals normally provide better results

It is extremely important that you understand that this depends completely on you. The debt professionals are undoubtedly trained experts; however, this obviously does not signify that you are not capable of accomplishing the things that they will do. A number of people have solved all their debt problems by putting in efforts on their own. If you are someone who feels that you will not be able to do it alone, only then you should hire professionals to do it for you. You need to be extremely careful about who you are hiring and trusting with the debt problem that you have. Whether you choose profit or non-profit organizations, you need to check if they are offering the services through phones, personal meetings, as well as online.

Debt settlement and debt consolidation are same

Another crucial myth about the debt relief programs is the confusion that revolves around debt settlement and debt consolidation. A number of people think that both of them are same and without even understanding which one is appropriate for them, they end up selecting one. You must have a proper knowledge about both debt settlement and debt consolidation and know that they are completely different from each other, and do not have any similarities. Debt consolidation involves combining the debts under a single and convenient payment plan. Debt settlement revolves around debt reduction. Without understanding the difference between the two, you should ensure that you are not opting for a debt relief program. Debt relief programs are unique and you can click here to know more about debt relief. According to www.valuepenguin.com, the average APR on the debt consolidation loans is 18.56%.

Debt settlement allows fast relief from debt

This is something that is partially true and partially false. Debt settlement normally involves negotiating the creditors so that they allow a particular person to pay only a certain portion of the entire debt, because of the financial crisis that they are facing. If you see that the creditors are agreeing immediately to your agreement, you have to pay the money immediately in a lump sum. Only this will allow you to get free from all your debts. However, if the creditors do not agree to your proposal and they are interested in dragging the agreement, it is going to take time to gain the debt freedom.

Debt settlement and bankruptcy: the former is better

Financial experts may suggest you opt for debt settlement in order to stay away from bankruptcy. It is true that both debt settlement and bankruptcy will provide you with a freedom from all the withstanding debts, but the credit score can have a negative effect. Bankruptcy is responsible for bringing more damage to the credit report in comparison to debt settlement. However, if you are facing serious financial problems and there is hardly any income, bankruptcy is the best option that you have.

Conclusion

Instead of believing in all the myths that are associated with the different debt relief programs, it is extremely important to educate yourself about all the programs and find out the one which you think is perfect for your situation. Consider the myths that have been stated below and go through the reality that is associated with them.