Pros & Cons of Debt Relief Programs

Debt is a bad word to most people. It’s the kind of obligation no one wants to think about. Unfortunately, debt doesn’t go away by just ignoring it. If you’re having trouble with your debt, it’s likely you’ve considered debt relief. Here are some of the pros and cons of debt relief programs. 

Get Professional Assistance with Your Debt

Navigating the world of debt can be intimidating. Most people aren’t financial experts, and therefore don’t know what’s best when it comes to managing and getting out of debt. There are some people who are successful negotiating with their creditors for better loan terms. But this can be time-consuming, and potentially not lead you anywhere. 

When you sign up for a debt relief program, you’re going to be working with people who have worked with others in similar situations. You no longer have to feel alone going through this complex process. Not only can this be beneficial to getting the best terms when negotiating debt, you can also feel better about not making blaring mistakes or accidentally doing something financially harmful. 

Can Get Out of Debt Faster

No one wants to be in debt forever. While debt relief programs typically take 24-48 months from start to finish, that’s a lot better than indefinitely living in a hole. One of the big perks of debt relief programs is they can allow you to get out of debt much sooner than you would otherwise. 

Another thing to consider is getting out of debt through a debt relief program can potentially be better financially than declaring bankruptcy. While this is sometimes the only option, bankruptcy will stay on your credit report for a whole decade. That’s a long time to be suffering the consequences. 

Better Able to Negotiate with Creditors

Some people find success negotiating with creditors on their own. Not everyone, however, feels up to the task. For those who need some assistance in order to settle or renegotiate their debt terms, debt relief agencies can provide an important lifeline. 

If you’re feeling up to trying, it’s often best to contact your creditors on your own before looking for help. This can save you a bit of money if you can negotiate on your own. Remember, debt relief companies need to make money somehow, so they will charge a fee after completing their services. 

While there are certainly situations in which it makes sense to opt for a debt relief program, it’s not all fun and games. There are some downsides as well. Consider these cons before signing up for anything. 

No Guarantee It Will Work

Some people think debt relief programs are like magic wands that can make all their problems disappear. This is definitely not the case. Sometimes debt relief works, but sometimes it doesn’t. There’s no guarantee you’re going to eliminate your debt when you complete a debt relief program. It’s even possible your situation could get worse during that time. Be wary of any organization that tries to tell you you’re guaranteed to get out of debt with their services. Chances are, they’re ripping you off. 

Can Damage Your Credit Score

Your credit score is an important number. Those three digits determine how easy it is for you to borrow money, and at what terms. Certain kinds of debt relief programs can have a negative impact on your credit score. This is particularly true with debt settlement. With debt settlement, you stop making your normal payments to your lenders, and instead send money to the debt relief agency. This gives the agency leverage to possibly settle your debts for far less than you initially owed. 

It’s important to note, however, doing this is likely to do bad things for your credit score. The largest factor in your FICO score — about 35 percent — is related to your payment history. If you stop making payments on all your accounts, that’s going to have a negative impact on your credit. 

It’s also wise to look out for hidden fees and potential fraud when looking at debt relief programs. Not all of these players are honest or have your best interest in mind. It’s smart to look toward national leaders, such as Freedom Debt Relief, when comparing your options.