debt relief programs

How to Choose a Debt Relief Program

Today, millions of Americans need help with their debt.

Although the 30-year fixed mortgage interest rate is 4.21 (as of 10/08/2010), down by 17.5% on a year-to-year basis (5.1 in 2009), consumers find it hard to meet their financial obligations.

Besides, late credit card payments generate extra fees that add up to the financial strain.

Even if a credit card bill is paid on the last day is due, some lenders still charge late fees or increase the late fees by moving the due dates earlier in the month without prior notice.

This creates a vicious cycle of debt that distresses consumers more and more.

A debt relief program is a form of debt repayment that intends to offer relief to those who cannot meet their minimum monthly payments.

In effect, a debt relief program allows you either to negotiate your debt with your creditors by choosing a plan to repay your debt and avoid bankruptcy (debt settlement) or to get a new loan to consolidate all your debt in one monthly payment that will be lower than all the individual monthly payments you currently make (debt consolidation).

However, between debt settlement and debt consolidation, it makes more sense to choose a debt settlement.

By negotiating with your creditors a settlement of your debt for 40%-60% of your current balance you will be potentially able to pay off your debt earlier and you will not owe any money to the creditors.

You will be making payments to the debt negotiator company.

Instead, with debt consolidation, the number of payments will be reduced due to a lower annual percentage rate (APR), but your debt will be transferred to a new creditor and your credit record will be damaged because you will be required to pay for a longer period.

Should you find yourself in a difficult financial situation and you decide on choosing a debt relief program, there are several factors you need to take into consideration.

In particular:

a) The legitimacy of the settlement company

Some scammers take advantage of the increasing problem of debt in the United States and set up fake debt relief companies that actually charge fees for their services and provide no service to the people who are in desperate need of debt settlement.

To protect yourself from such frauds make sure you check the legitimacy of the settlement company you are considering a debt relief program with the Better Business Bureau (

b) Variety of solutions offered

Many settlement companies do not offer a great variety of options in regards to debt relief, which means that you may not be able to find the right solution to settle your debt.

The greater the variety of options, the higher the probability of finding a suitable debt relief program to solve your debt problems.

c) Fees charged

It goes without saying that you will be asked to pay the settlement company fees for their services, which typically equal a percentage of the amount they will help you save up.

However, some settlement companies may charge you for more than the legitimate fee or they may charge you even if their negotiations fail and your debt is not settled.

Therefore, before signing a contract with a settlement company authorizing them to negotiate your debt on your behalf, make sure to clarify what is their fee policy.

Overall, choosing a debt relief program requires serious consideration of your options to avoid finding yourself in a worse position than before.

Do your research over the Internet; ask other people who have worked with a settlement company; consider the impact of the debt settlement on your credit score.

All these are additional factors that you need to consider before actually assigning your debt settlement to a settlement company for a debt relief program.

If you follow all these steps you are more likely to have your debt settled for what you actually owe.