Consumer Debt Relief Programs

I was laid off from my job almost two years ago, and didn't have much luck finding anything else in my field until recently. Before this, I had to take on low-paying retail work just to have some cash flowing in, but those paychecks were never enough to cover all my bills even though I scaled back on as many extras as I could. After living that long without cable, internet, nights out on the town, going to movies at the theater, and eating at restaurants, I still managed to deplete my savings and rack up thousands of dollars in credit card bills. Now that I've got a better salary, I checked out various debt relief programs to get my finances in order. Here's what I learned.

There are a lot of debt relief programs out there that can help consumers pay off their bills and start repairing their credit rating. One of the most popular approaches is consolidation, in which a private company issues you a loan to pay off all your high-interest credit card balances. Then instead of sending checks to a bunch of different places every month, you simply make a single payment to the consolidation firm. While this type of loan might carry a higher interest rate than a bank would charge, it's still much lower than the typical 19 percent that credit card companies throw at you. Furthermore, the qualifications for a loan from these debt relief programs are not nearly as strict as for a bank, so this is a great option.

Some debt relief programs offer to help consumers reach settlements with their creditors. Usually this involves a bit of negotiation as you try to reach some middle ground between what you owe and what you can actually afford to pay. Some creditors might be happy accepting 70 cents on the dollar, while others could go even lower than that. The catch is that you'd have to pay the agreed-upon amount immediately, so obviously this type of program won't work unless you have enough money to cover the final settlement. Still, the opportunity to pay off your bills at a reduced amount makes this one of the most popular debt relief programs out there.

If all other alternatives fail, then bankruptcy might be the only road to take. This is a drastic step, however, and should not be considered until all other avenues have been exhausted. Bankruptcy is different from other debt relief programs because it wipes out your bills in one fell swoop. But there is a major drawback: your credit rating will be affected for the next 10 years, greatly limiting your ability to buy a home or car, start a business, or get a loan.

After digesting all this information about debt relief programs, I've decided that consolidation is probably my best choice. Now all I have to do is find a company to handle the process, and I can finally start digging myself out of this financial hole!