Currently in the United States Bankruptcy, debt settlement services and debt consolidation are the credit card relief options available for consumers.
What is the best route?
In order for consumers to make this assessment they need to first analyze their overall financial situation, hardship, available budget, personality traits and what they feel comfortable with at the end of the day. Consumers that have a debt crisis will usually lack the necessary experience needed to examine all of these determining factors on their own, where assistance is needed.
The following two steps will help people in America with making the financial decision regarding debt consolidation, debt settlement or bankruptcy.
Step One – A way for People to Provide Themselves with a Quick Quote
This first step will also force a person to take a close look at their budget.
These numbers are not in stone or guaranteed and each persons situation is different, but they based on what many of the reputable and highly rated companies quote to consumers.
Here is a quick and easy way for consumers to quote themselves to see if they would qualify for a debt settlement service or a consolidation plan.
Can a person afford to make a monthly payment that is equal to 1.8% of what their total debt is over three years give or take some?
Example using Joe.
– Joe has $30,000.00 in total unsecured credit card debt.
– Can Joe afford a payment of $540 per month over a three year term? (30,000 * 1.8%=$540)
If $540 is a feasible monthly payment, then debt settlement could be the best option in this case for Joe.
Debt Consolidation or Consumer Credit Counseling Plans:
A person would need to be able to afford more than 2% of what their total debt is for on average 4 years, as a monthly payment with debt consolidation.
On a debt consolidation plan, on average Joe’s payment could be around $675 on a monthly basis.
This would be a significant amount higher payment than what it would be with a debt settlement service. With Debt Consolidation a persons payment will often be close to what they are paying when paying minimum payments on their own. The good news about debt consolidation is that a person ends up paying less interest and getting out of debt faster, than when paying minimum payments on their own.
If a person cannot afford to pay 2% or more of what their total debt adds up to as a monthly payment, then debt consolidation and continuing to pay minimum payments on their own would not be feasible routes for them to take.
If a person has $30,000 in total debt as mentioned above and can only afford to pay 1 % or ( $300) per month as a payment, then they should consider bankruptcy.
There are many times where consumers will contact companies and get quoted longer terms and higher payments, than these numbers listed above as examples.
Consumers should look at how much in fees a company is charging.
Some companies this day and age charge more than 20% of what a person’s total debt amounts to, in fees.
Consumers should stay away from any companies that charge more than 15% of what their total debt amounts to, in fees.
If a consumer speaks with a company that provides them information that sounds too good to be true, then it most likely is. If a company is lying to consumers, they will also most likely have a poor rating with the Better Business Bureau. Consumers should always check with the Better Business Bureau before joining with any company. Consumers should stay away from any companies that have worse than a B- rating with the Better Business Bureau.
Step 2 – Personality
What type of personality does a person have?
Are they conservative, get anxious easy and don’t like drastic change? If a person has these personality traits, then they should probably consider debt consolidation.
Is a person motivated, driven, aggressive and prefers to get things done fast? If a person has these personality traits, then they should consider debt settlement.