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(Franklin Debt Relief offers a debt settlement program to consumers
and is not a credit counseling agency. The information presented
below is for educational purposes, so that consumers can make a more
educated decision on whether debt settlement, the service offered by
FDR, or credit counseling, the option described below, is a better
debt relief solution for their situation).
With millions of Americans filing bankruptcy and credit card
charge offs increasing by the quarter, more and more consumers are
in desperate need of debt relief. The main bankruptcy alternatives
available to consumers are debt settlement, also known as debt
negotiation or debt reduction, and credit counseling, also known as
debt consolidation or debt counseling. Both programs have their
advantages and disadvantages. With debt settlement a consumer can
become debt free within 12-30 months if they complete the program
and their accounts are settled, pay off their debts for less than
they owe, and make one low program payment. In a credit counseling
program, consumers are able to lower their interest and become debt
free much faster than would otherwise be possible by just making the
minimum payments. For consumers who are feeling overwhelmed or
buried by their monthly payments, both debt relief options serve a
good purpose and can help clients avoid bankruptcy if the consumer
completes the program.
One downside of both programs, however, is your enrollment will most
likely affect your credit negatively (assuming you’re not already
severely past due), oftentimes making you unlendable until the debts
are paid and even longer with debt settlement. This being the case,
all consumers should consider whether they’re actually in need of
debt relief, or if their debt situation can be corrected by better
budgeting or a low interest loan instead. Before you make any
decision, add up all of your debts and the minimum monthly payments.
Add to that any other expenses that you may have on a month to month
basis like groceries, utilities, mortgage payments, car payments. Be
sure to leave ample room for miscellaneous expenses that will
inevitably come up from time to time (car repairs, taxes, home
repairs, etc.). Now add up your income and compare it to all of your
expenses. If you’re left with enough money every month to pay a
decent amount more than your minimum payments, chances are debt
relief is not needed unless your interest rates are low. If not, you
should begin your search for an appropriate solution.
Here are some questions to consider before enrolling in a debt
reduction or credit counseling program:
-Is my situation the result of overspending or a financial hardship?
A financial hardship is any unforeseen circumstance that may have
had a large influence on your ability to pay off your debt. Some
common examples are divorce, medical issues, and a reduction income.
Most consumers who fall under the “financial hardship” umbrella are
great fits for debt relief. If your situation is the result of
overspending primarily, try to cut back on your unnecessary expenses
before you seek outside help. If you find that you still are not
able to reduce your debt or afford your payments, then you should
start considering whether debt negotiation or credit counseling is a
better fit.
-Do I have equity in my home? If so, do I have the credit to get a
home equity loan? And if I did tap into my equity, would I be able
to afford the payment? Obviously the last thing you want to do is
consolidate your credit card debt in a mortgage, fall behind with
that and end up losing your home when numerous bankruptcy
alternatives were available to you. Another thing to consider is
whether doing this will actually correct the underlying problem of
overspending or not budgeting properly. One upside of the negative
credit impact of debt settlement is it forces people to live within
their means by closing their credit card accounts and not being able
to take out any other loans. Oftentimes it instills the financial
discipline that many consumers lack.
As with anything, proper education and thorough planning is
imperative before choosing debt reduction or credit counseling. If
you would like to learn about what option is best for you, please
call (877) 274-1260 for a free consultation, or you can
fill out a form
and we’ll contact you as soon as possible.
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