If you are facing a growing mountain of debt and are unsure how you can possibly climb out from under it, it may be time to talk to a debt specialist who can help you understand your options. Debt management plans and debt resolution are two common choices that can help you manage payments and eliminate your debt. They function differently, however, so it is important to understand the basics of each. Keep reading to learn more.
If you can afford a high monthly payment and meet certain criteria, a debt management plan may be a good option for you. It consolidates your high-interest debts into a single payment, which is made to a third-party management company such as Rescue One Financial. During this type of program, you will be responsible for the full balances of any debts and your credit will reflect that a third party is being paid.
In cases where your debt has spiraled out of control and you aren’t able to even pay the interest that is accruing, you may want to look at other debt options. Debt resolution involves negotiating with creditors for lower balances. Those are then consolidated into a single lower payment which is made to a third party lender. While there are no guarantees, many people end up paying about 50 to 60 percent of their original balances through a resolution program.
Debt and Your Credit
There are no guarantees that a debt repayment plan will improve your credit score. Lenders generally look at long-term history, so the fact that you fell behind in the first place will remain visible to them for several years. However, it can stop collections and missed payments from appearing going forward. Take time to understand the factors that affect your credit score and work toward improving it if you have concerns.
No matter how you got into debt or how much you owe, know that there are ways out. Take steps toward repaying your balances and reclaiming your financial future today. Then, work to achieve healthy spending habits and a solid credit score to make borrowing easier in the future.