What You Weren’t Taught in School About Debt Relief

It’s alarming that the average American carries a debt load of over $90,000. It only takes a little to push someone over the edge financially. A severe medical condition, unexpected job loss, or any other factor that reduces income can quickly lead to financial distress. When expenses surpass earnings, people end up in a precarious situation. Interest and fees accumulate, and hardworking families become more and more indebted.

Once individuals fall behind on their monthly payments, they are bombarded with phone calls, text messages, and collection notices. However, the good news is that there are solutions to ease this burden. By researching and creating a debt consolidation plan, you can feel relieved that options are available. NY TEAM is prepared to assist you in this process.

What is Debt Relief?

When it comes to managing debts, relief strategies can serve two purposes. Firstly, they can help individuals struggling to make loan and credit card payments by reducing their obligations. This can involve lowering monthly payments or minimizing the impact of accruing interest. Secondly, debt relief can benefit creditors by providing partial or complete payments toward the balances owed.

It’s important to note that creditors are more likely to consider debt relief options when individuals need to catch up on monthly installments or when other solutions become less favorable. Fortunately, various debt relief options are available to those experiencing financial hardship. These strategies can effectively alleviate negative revenue issues with various creditors.

Debt Relief Through Debt Management

A well-planned debt management strategy aims to pay off unsecured debts with reduced interest rates. This method is commonly used by individuals burdened with high credit card balances, and it involves requesting lenders to decrease interest rates and waive fees.

Sometimes, a credit counseling agency may handle a single monthly payment and disburse the funds to creditors. Experienced counselors typically have established connections with credit card companies, which makes the process smoother. However, making a monthly payment can maintain the debt relief plan.

Debt Relief Through Settlement

Hiring a debt settlement company can have benefits when negotiating with creditors to find personal debt relief. Settling accounts for less than what is owed can be appealing. However, it is crucial to be cautious as some debt settlement organizations may use aggressive tactics that could backfire.

For instance, a debt settlement company may suggest that individuals stop paying their creditors and instead deposit money into a designated account. This tactic is intended to increase leverage over creditors to secure favorable terms. Yet, it is essential to note that those who follow this advice may accumulate significant interest and late fees. This strategy is risky because creditors are not obligated to settle for less.

Debt Relief Through Bankruptcy

When finding relief from overwhelming debt, bankruptcy is often seen as a last resort. Many individuals turn to lawyers or attempt to file for bankruptcy independently. While bankruptcy can provide some relief, it also comes with consequences that may not be desirable.

Filing for bankruptcy can have a negative impact on credit scores and limit access to borrowing opportunities. It’s not uncommon for the effects of a bankruptcy filing to last for as long as 7-10 years, with the blemish remaining on one’s credit report. Because of this, it’s essential to consider all other options for debt relief before turning to bankruptcy.

Take Debt Relief into Your Own Hands

If you’re struggling with debt, consider seeking the help of a debt relief professional. However, local credit unions like NY TEAM FCU offer products to help you achieve your goals. One effective solution is consolidation.
As a credit union member, you can apply for a loan to cover outstanding balances and consolidate your debt into one manageable payment. Credit unions are an excellent resource for debt consolidation because they usually offer low-interest rates and minimal processing fees. At NY TEAM, three standard debt consolidation solutions are available to eligible members.

  • Home Equity Loan: If you own your home without any outstanding mortgage payments or have substantial equity, you may be eligible to apply for a low-interest home equity loan. This loan can be in the form of a second mortgage or a home equity line of credit. The equity in your home acts as collateral, which results in lower interest rates and fees. Consolidating multiple accounts into a single payment can lead to debt relief, making it easier to manage your finances.
  • Low-Interest Credit Card: Using a new credit card to pay off old debt can be a smart move. Local credit unions like NY TEAM offer their members lower interest rates than banks. By consolidating all your balances onto one card with a low-interest rate, you can avoid rapidly accumulating interest and fees on your existing debt. NY TEAM FCU is offering a 0% Balance Transfer option for up to 18 months. This could be an excellent opportunity to take control of your credit card debt.
  • Personal Loan: Considering a personal loan for consolidating debt is still a feasible option. While personal loans may have slightly higher interest rates than secured ones, credit unions usually offer competitive rates. It would be beneficial to assess the rates of credit cards and existing loans and compare them to personal loan rates.

The crucial thing to note is that regular individuals can handle their financial situation by conducting their research and finding a reliable debt consolidation solution. By taking a do-it-yourself approach, they can streamline their various financial obligations into one monthly payment, avoiding the need for expensive debt relief methods like bankruptcy. This method provides a debt relief reset that is both effective and affordable.

Debt Relief Strategies to Avoid

During times of financial hardship, it is important to prioritize a solid debt relief plan to prevent further emotional distress. When stressed, individuals may make rash decisions that can ultimately worsen their situation. Some common missteps include draining retirement accounts to pay off creditors, taking out a risky home equity loan, and prioritizing unsecured debts (like credit cards) over secured debts (like car loans or mortgages). It’s crucial to avoid feeling pressured by creditors and, instead, take a step back to create a debt relief plan that aligns with your long-term financial and personal goals. Weigh all available options before moving forward with your plan.

How to Get Debt Relief Help

Obtaining assistance has become more convenient than ever. You may get a complimentary report of your credit history from the primary reporting agencies to identify and resolve any fixable problems, allowing you to stabilize your FICO score as much as possible, considering your present situation. Create a comprehensive list of the debts you want to merge and arrange a time to meet with a NY TEAM Lending Expert. We are always available to assist you!

View the Consumer Financial Protection Bureau’s latest article What are debit settlement/debt relief services and should I use them?

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