Many people are struggling in today's economic climate to make ends meet. For some it just goes a step to far and they fall in the cycle of debt and ever increasing interest rates and repayments.
Due to this a large debt relief industry has been created ostensibly to help people. At one end it does exactly that, however there are many companies out there that provides a less reputable service and they should be avoided at all costs.
The intention of this piece is to run through how the industry can help and some of the potential pitfalls.
The industry is generally split two ways. the first is for debt consolidation programs and that involves taking out a loan large enough to cover all of the existing debts. The interest payments and really reduced and the individual taking out the loan gets one manageable payment every month.
The advantages are, that all the current payments can be consolidated into one low monthly payment that you can afford. However, the amount someone actually owes will increase, because there are hefty consolidation fees to be paid. Also it takes a very long time to pay off.
Another major issue for many, is that just to qualify for a loan like this in the first place you need to have assets as collateral. If you are in this position it is quite likely that you won't have these.
Then there is the debt negotiation route. This differs from consolidation in that a company negotiates on you behalf to secure large discounts on your debts. They use their skills and experience of the industry, to make the companies that are owed money understand that this is the best route for them and you.
It's advantages are that you can get huge discounts, up to 80% of what is owed, you save on the interest rates and can be debt free extremely quickly. The disadvantage is that it can affect credit ratings.
If you decide to go this route only sign up with a company that charges based on their performance. That means that you only pay a percentage of the money they can save you.
Due to this a large debt relief industry has been created ostensibly to help people. At one end it does exactly that, however there are many companies out there that provides a less reputable service and they should be avoided at all costs.
The intention of this piece is to run through how the industry can help and some of the potential pitfalls.
The industry is generally split two ways. the first is for debt consolidation programs and that involves taking out a loan large enough to cover all of the existing debts. The interest payments and really reduced and the individual taking out the loan gets one manageable payment every month.
The advantages are, that all the current payments can be consolidated into one low monthly payment that you can afford. However, the amount someone actually owes will increase, because there are hefty consolidation fees to be paid. Also it takes a very long time to pay off.
Another major issue for many, is that just to qualify for a loan like this in the first place you need to have assets as collateral. If you are in this position it is quite likely that you won't have these.
Then there is the debt negotiation route. This differs from consolidation in that a company negotiates on you behalf to secure large discounts on your debts. They use their skills and experience of the industry, to make the companies that are owed money understand that this is the best route for them and you.
It's advantages are that you can get huge discounts, up to 80% of what is owed, you save on the interest rates and can be debt free extremely quickly. The disadvantage is that it can affect credit ratings.
If you decide to go this route only sign up with a company that charges based on their performance. That means that you only pay a percentage of the money they can save you.
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To find out more information about the debt relief industry click here or to see our list of the best organizations.
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