You cannot pay off your debt in a day. But you could a use debt reduction service, which will decrease the amount of debt you owe. Do not wait for your debts to accumulate. Pay them off as soon as you can.. Before you choose a debt reduction service, be sure you fully understand the process. Here are the pros and cons of debt reduction.
PROS OF DEBT REDUCTION
Dealing with constant calls and letters from creditors can be very srressful. Some make it worse by threatening to take the matter to court. A debt reduction company can come to your aid by negotiating settlements with your creditors. Because the company informs the creditors that they will be handling your finances, the frequent and harassing phone calls will be stopped.
Ability to consolidate debt
One of the advantages of debt reduction is the ability to consolidate debt. With debt consolidation, your debts are merged so you will make a single monthly payment. This will enable you to keep up with the payments so your finances will improve with time.
Lower interest rate
If you have stopped making the minimum payments, you may be charged high interest rates and penalties. Most debt reduction companies will negotiate with your creditors for a lower interest rate. Lower interest rates result in lower minimum payments so you will save money. By starting to pay off your debts, you will improve your credit ratings.
Debt reduction programs include credit counseling where you will be taught how to manage your finances. The credit counselor will help you work out a budget so you will be able to make minimum monthly payments.
Improved credit rating
Once you start working towards reducing your debt, your credit rating will improve. After some period of time, your credit score will improve so it will be easier to get loans in the future.
CONS OF DEBT REDUCTION
If the debt reduction company fails to make the required payments on your behalf, your credit score will be negatively affected. Always check with the debt reduction company to ensure that it has made the payments to your creditors. Review the status of your account by calling your creditors. If you find out that the debt reduction company is not making its payments, take responsibility and make them yourself.
A debt reduction program negatively affects your credit because it will show up on your credit report. This can show that you have not managed your finances well so that you may have a difficult time convincing lenders to give you a loan. Remember that the program may show in your credit report for a period of 2-3 years.
Sign up fees
The debt management company may require you to pay fees upfront for its services. The fees are usually low but if you do nit have the money, the company will not be willing to help you. It is your right to question the fees you are being charged to prevent fraud.
Lack of control
Debt reduction services differ with companies. Many companies take full control of the debt payment. The debt reducing company is in charge of determining how much is to be paid to each creditor. You do not have the option of choosing payment dates because the company will do it for you.
The debt reduction industry is prone to misleading advertisements, which can give you wrong information. Such companies may even put pressure on you to make payments immediately without even]having reviewed your financial situation.