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Answers to common debt management questions

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Mark Cappel
UpdatedNov 30, 2022
Is Debt Management a good solution to one's problem if say they are only 20,000.00 in debt or 200,000.00?

Is Debt Management a good solution to one's problem if say they are only 20,000.00 in debt or 200,000.00?

Thanks for your question, and no matter what you owe, you have debt management and debt consolidation alternatives.

Debt management can come in many forms, so it is important that each consumer reflects on what their needs and concerns and financial situation is before signing up for a debt management program. The four primary concerns for most consumers are: i) monthly payment, ii) time to debt freedom, iii) total cost, and iv) the credit rating impact of the debt management consolidation program. Be sure to evaluate each program, relative to your prioritization of these factors.

Since there are a variety of debt management options, including credit counseling, debt negotiation/debt settlement, a debt consolidation loan, and other debt resolution options, it is important to fully understand

each option and then pick the solution that is right for you.

Credit Counseling

Credit counseling, or signing up for a debt management plan, is a very common form of online debt consolidation. There are many companies offering online credit counseling, which is essentially a way to make one payment directly to the credit counseling agency, which then distributes that payment to your creditors. Most times, a credit counseling agency will be able to lower your monthly payments by getting interest rate concessions from your lenders or creditors. It is important to understand that in a credit counseling program, you are still repaying 100% of your debts - but with lower monthly payments. On average, most online credit counseling programs take around five years. While most credit counseling programs do not impact your FICO score,

being enrolled in a credit counseling debt management plan DOES show up on your credit report... and, unfortunately, many lenders look at enrollment in credit counseling akin to filing for Chapter 13 Bankruptcy - or using a third party to re-organize your debts.

Debt Settlement

Debt settlement, also called debt negotiation, is a form of online debt consolidation that cuts your total debt, sometimes over 50%, with lower monthly payments. Debt settlement programs typically run around three years. It is important to keep in mind, however, that during the life

of your debt settlement program, you are NOT paying your creditors. This means that a debt settlement solution of online debt consolidation will negatively impact your credit rating. Your credit rating will not be good, at a minimum, for the term of your debt settlement program.

However, debt settlement is usually the fastest and cheapest way to debt freedom, with a low monthly payment, while avoiding Chapter 7 Bankruptcy. The trade-off here is a negative credit rating versus saving money.

Debt Consolidation Loan

Many people think first of a debt consolidation loan when seeking online debt consolidation. This option typically means a second home loan (or home equity line of credit) or refinancing your primary mortgage. In a debt consolidation loan, you exchange one loan for another. The most frequent form is taking out a mortgage loan, which carries a lower interest rate and is tax deductible, to pay off high interest rate credit card debt. It is important to be aware that shifting unsecured debt to secured debt can create a volatile situation, if there is ever a chance that you cannot afford the new mortgage payment you are now putting yourself at risk of foreclosure! In the case of a debt consolidation loan, most mortgages are 30 year loan, which means that

the total cost and the time to debt freedom could be very high... but the monthly payment will be lower than other options and there is no credit rating impact.

Net-net:

While there are many forms of online debt consolidation, many people with good to perfect credit who own homes should look into debt consolidation loans, while consumers with high credit card debt and poor credit may want to explore debt settlement or debt negotiation. However, each consumer is different, so find the online debt

consolidation option that fits for you.

Bills.com makes it easy for you to apply for the best solution that meets your needs, by following this link:

https://www.bills.com/debthelp/debt/

We hope that this helped you to Find, Learn, and Save!

Best,

Bill

www.bills.com

Debt statistics

Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q2 2022 was $16.15 trillion. Auto loan debt was $1.50 trillion and credit card was $0.89 trillion.

A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.

The amount of debt and debt in collections vary by state. For example, in New Jersey, 22% have any kind of debt in collections and the median debt in collections is $1273. Medical debt is common and 11% have that in collections. The median medical debt in collections is $472.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.

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