A debt elimination program can relieve you of one of your biggest worries – your debts. There are qualified debt management companies and professionals who provide solutions that can help set you free from debts through debt elimination in a legal and ethical manner.
All types of debt can be eliminated whether it is credit card debt, student loans, home loans, auto loans or personal loans. Under the debt elimination program, you can either tackle your various debts separately or tackle them all in one go. Debt counselor will analyze your debt situation before introducing you to a debt elimination program.
What all does a debt elimination plan involve?
A debt elimination program/plan includes the following:
1. Cut the number of creditors: More creditors mean more troubles. And if you have defaults in any debt, then you will never be able to live an easy life. The first step under the debt elimination program will be minimizing the number of lenders. That will be done through refinancing or consolidating all creditors’ debt into a single loan. For example, if you have auto loans, credit card debt, home loans and education loans from different lenders and you make monthly payments, your loans will be consolidated using a single large loan to pay off all the other debts. Moreover, you might also get better interest rates and easier payment plan on the consolidated debt.
2. Payroll deductions: Another good option suggested by debt elimination programs is to set up a payroll deduction for making your monthly debt payments. This is a nice trick because it makes you realize what your actual pay is after adjusting for your debt payments. Moreover, this will put the creditors at ease because they will not be concerned about your payments as they are now assured that they will get the money directly from your salary.
3. Favorable rates: Higher interest rates on various debts means a major part of your monthly payments is only interest and you are paying a very minimal amount towards your principal. This can make it really difficult to actually pay off your debts. However, a reduction in interest rates can do the trick for you; and you would be able to pay back your debt earlier or reduce your monthly payment amount. This can be done either through negotiations with creditors, or through refinancing your debt through new lenders with more favorable rates. Debt consolidation and credit card balance transfers are good examples.
4. Extend the debt period: Another tool under the debt elimination program is to extend the life of debts. Through negotiations, your short-term loans can be converted into medium or long-term repayment terms. After debt period extension, your monthly payment amounts will reduce. But, you January have to pay higher interest rates in the bargain.
5. Converting to secured loan: Another option under the debt elimination program is to convert your debts to a secured debt e.g. through refinancing a home mortgage loan (with cash payout option) or through home equity line of credit. This is a good option because the interest rates on secured loans are lower. But, you should also be aware that using your home as collateral is a great risk. Your home will be at stake if you miss payments and your loan goes into default.
There are profit-making and non-profit organizations that can help you in debt elimination. You could search for them on the web and you will get a long list of names. However, all firms are not same and the best way would be to enquire about the best firms through your friends and others who have used such services in the recent past. You can also check with the Better Business Bureau to know whether the firm is registered or not. Be sure to not fall prey to a company who wants to take advantage of your situation.