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Which debt relief program works for you?

[Dec 14, 2010.]


The type of debt relief program you need depends on the amount of your debt and your prospects for the future. It also has a lot to do with your ability to discipline yourself. Over the past few years, the economy has taken some sharp turns, and left many people scrambling to get their budgets in order. Take a realistic look at where you are at, consider the following, and follow the path that does you the most good and the least harm.

1. DIY budgeting

You are in debt. Is it because you spent too much, or because your income has changed significantly? You should have a detailed budget that covers at least a full year. If you only pay car insurance twice a year, a two month budget might miss that large line item. Go through your bank statements and check register for a full year or more. Pick up every line item that should be budgeted.

Discretionary budgeting should be conservative. Don't budget for how much you'd love to spend, but how much you are able to spend after paying bills and saving money. Other than a negative change in income, debt is often a product of failing to follow a sound budget.

2. Credit card debt consolidation

A credit card debt consolidation usually means consolidating a number of credit cards into one monthly payment with a set interest rate and term. Consolidating your credit card debt should do little, if any, harm to your credit score. This option can do the most good with the least harm, if you want the convenience of a single payment and you are disciplined enough not to go into debt again. If your income is reliable, and you've simply overspent your means, this option may work the best for you.

3. Debt settlement program

Settling your debt through a debt settlement program has more negative consequences that just a consolidation loan. With a debt settlement program, you are not paying the amount you owe in full. This has a negative effect on your credit score. However, if you've lost your job, or suffered a reduction in income, you may have no other choice. The lenders you owe would rather have part of what you owe than nothing. So, they may be willing to settle.

For more information, consult a debt relief specialist now.


About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.

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