With the average consumer’s credit score falling lower and lower, there are many agencies out there offering consumers relief from debt. The average American’s credit score is at 678, leaving a lot of Americans in the debt ridden realm. There are many options out there for consumer debt relief. Debt consolidation, bankruptcy, and debt arbitration are all avenues that could be traveled to end debt.
Debt consolidation will satisfy all of your unsecured debt with one monthly payment. When seeking consumer debt relief, debt consolidation helps alleviate interest charges, stop your account from accruing late fees, and reduce finance charges. Some forms of aid come as a debt consolidation loan. A company will lend you money to pay off your unsecured debts while you work on repaying the loan. Either way, all of your debt is combined into one monthly payment. The down side to debt consolidation is that it only provides relief from stressing over multiple creditors. The debt is still there and you must still work to pay it back. As consolidation reduces finance fees, interest rates, and late fees, it does not eliminate those fees and the costs continue to accumulate.
Bankruptcy is another avenue toward consumer debt relief, although it should be promoted as the last resort. Bankruptcy allows you to rid yourself of debt and give your credit a fresh start. It also allows those you owe to get a fair share of the amount you are able to repay. There are two types of bankruptcy that will allow you a fresh starts: chapter 7 and chapter 13. A chapter 7 bankruptcy sells something you own in order to pay back your creditors. A chapter 13 bankruptcy allows you to keep all of your possessions as you pay on the debt with the money earned after filing the chapter 13 bankruptcy. The down side to filing bankruptcy is the fact that it remains on your credit for at least 10 years. The bankruptcy may stop lenders from giving you credit. Most often, these lenders want you to be clear of your bankruptcy for a number of years before they will allow you to borrow from them.
Debt arbitration ensues when a firm of debt settlement specialists takes over all communication with your debtors. This firm will then negotiate an amount for you to repay to your creditors through establishing a budget with you. Much like debt consolidation, debt arbitration takes away the strain of dealing with multiple creditors; however, the debt itself remains ever present and the amount you owe does not change.
On the same token, there are many scams in the guise of debt relief. The FTC estimates that nearly 25 million Americans, or 11.2 percent of adults, were victims of fraud from May 2002 to May 2003. It is reported that those with a high amount of debt are seven times more likely to be approached by scams. It is important to research and keep an eye open for frauds when seeking consumer debt relief.
By Venus Brady
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