by The word debt can elicit negative feelings, but borrowing is not inherently bad. Mortgages and auto loans allow you to secure housing and transportation, while credit cards provide liquidity to buy products and services that you need or want. However, if you’re struggling to keep up with your monthly payments or feel overwhelmed by mounting balances, it may be time to consider a debt relief program.
These programs typically employ one or more strategies for tackling a borrower’s outstanding debt, such as negotiating with creditors to settle debt, consolidating debt into a single loan with lower interest rates or lowering fees. A credit counselor can help you understand the different options and decide which might be best for your situation.
The most common type of debt relief involves working with a professional negotiator to settle credit card debt for less than what is owed. This is also referred to as “debt negotiation,” “debt settlement” or “debt resolution.” However, there are some risks to this solution: Creditors may refuse to settle debt, you’ll pay an up-front fee to the debt relief company, and settled debt can be taxed as income.
Another option is a debt management plan, which requires you to make a single, affordable monthly payment that will be distributed among your creditors. This solution is often cheaper than paying your debts on your own, and it can have a minimal impact on your credit rating. However, it can take 36 to 60 months to complete and doesn’t prevent your creditors from contacting you in the future.
Debt consolidation loans and balance transfer credit cards combine several debts into a single monthly payment, and they typically have lower interest rates than credit card rates. However, they can temporarily ding your credit score because you’ll have to apply for a new credit line, and it will likely require that you sacrifice some of your other financial goals in the process.
A final option is bankruptcy, which can wipe out all your eligible debt and provide a fresh start. However, bankruptcy can be expensive due to attorney and court fees. It can also result in you having to sell some personal possessions. Plus, bankruptcy can remain on your credit report for seven to ten years.
Debt relief company in New Mexico can be expensive, and it is important to be aware of the risks involved before you sign up with one. You could end up paying more than you owe or losing valuable assets if you are not careful. Additionally, any forgiven debt will likely be considered taxable income in the year it is settled, which can hurt your tax returns.