Debt Elimination Program

How do you determine if you need a debt consolidation program?

Anyone who is heading for financial trouble needs to address their debts as a first priority. You know you are looking at financial problems if you are concerned about how much debt you carry, if you are only able to pay the minimum payment due on credit cards and other debts, if your creditors are calling you, if you have no savings, or if your credit cards are nearly at their limit. Any of these indicators is a clear sign that you're heading for financial trouble.

Once you understand that you need help eliminating debt, your choice of a debt consolidation program is vitally important. The four most popular types of programs are outlined below. Of course, there is always another option - do nothing. This is the worst possible decision you can make about your financial future. Understand that only making minimum payments on unsecured debt means that it will take you 15-30 years to become debt free - presuming you do not incur one cent of new debt during that time period. This is a terrible choice, and one that will massively impact your financial well being in the future. Read about debt consolidation and how debt programs can help.

Debt Elimination Programs

1) Bankruptcy

Filing bankruptcy is one way to eliminate debt. However, it is important to understand the degree to which this decision will impact your future. Your history of filing bankruptcy stays on your credit report for 10 years. This has a terrible impact on your credit rating - for at least 10 years. It can preclude you from buying a home for many years, and it can preclude you from accessing loans. Not to mention, any money borrowed during this period will cost you much more as a result of this negative information. You will pay much higher interest on any money borrowed than will someone who has not declared bankruptcy. In addition, declaring bankruptcy can cost thousands of dollars in legal fees.

2) Home Equity Loans

Those who own homes or property with equity can consolidate unsecured debts by taking out a consolidation/home equity loan. The problem with this choice lies in the fact that all of your unsecured debt ends up as secured debt. This can put your home or property at risk, in that any future inability to keep up with costs means that all of your equity is within your creditor's reach. Those already struggling to keep up with unsecured debt must consider that there's much more to loose by choosing a home equity loan as a debt elimination strategy. Many financial advisors believe that it is critical to keep unsecured debt as unsecured.

3) Debt Elimination Program with Consumer Credit Counselors/Non-Profits

This type of debt elimination program is the kind you see advertised in newspapers and on television, and there are thousands of such programs operating today. These programs negotiate a situation whereby you repay the full principle of all unsecured debts over time, and get a break on the interest rate you must pay. There is typically a monthly contribution of $35-$55 dollars per month that is required to join these programs. This money is added to your monthly payments, but is not applied toward your debt repayment.

Always keep these 'fees' in mind when considering these types of debt elimination services. More importantly, understand that banks and credit card companies are the primary contributors to these programs. They began setting up these debt consolidation programs over 10 years ago as credit card defaults began to rise. Many have argued that these programs are not about working with individuals - they are working to the advantage of creditors.

Even worse still, most of these companies and organizations will report your participation in their program to the Credit Reporting Agencies (CRAs). This information goes onto your credit report, and it stays there for up to 7 years. Many future creditors view this information as a black mark on your ability to pay debt. Needless to say, the negative impact on your credit history must be carefully considered.

4) Debt Negotiation

In one phrase - debt negotiation is the smart choice of any debt elimination program. Debt negotiation works for you as an individual - not your creditors. Debt negotiation works by using professionals - ideally lawyers and paralegals - to negotiate debt elimination strategies with your creditors. These programs strive to do more than just cut down the interest paid on debts. They strive to cut down the debt itself, helping you pay less in both principal and interest.

The best debt negotiators are lawyers and paralegals with expertise in debt negotiation. Learn more about how a debt consolidation program that works toward settling all of your unsecured debt for 60 cents on the dollar - or even less can save you 40% off your debt principal!! Debt Settlement can lessen the money you owe to your creditors and help you to become more financially stable.

Finding the right debt elimination program demands some knowledge on your part. Know who you're working with and whether they are providing services and strategies that work for you or for your creditors. How to eliminate debt and regain a solid credit standing is in your hands. Ask questions and expect to see results from any professional who promises to help eliminate debt on your behalf.