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Debt Relief: What They Didn't Teach You in School

Dec 07, 2022

Given the average American carries more than $90,000 in personal debt, it doesn’t take much to push someone over the fiscal edge. A significant medical condition, unexpected work disruption, or other issues that reduce income can overwhelm personal finances. Once expenses exceed salaries, borrowers find themselves on a slippery slope. Interest and fees begin to mount as hard-working families grow increasingly indebted.

Once people start falling behind on monthly payments, the harassing phone calls, text messages, and collection notices never let up. But the good news is that there are debt relief solutions available. By conducting some due diligence to develop a debt consolidation plan, you can breathe a sigh of relief knowing solutions are available, and Peach State is ready to help.


What is Debt Relief?


Debt relief strategies serve two distinct purposes. On one hand, the person struggling to meet loan and credit card payments among others, reduces their obligations. This can take the form of lower monthly payments or minimizing the impact of accruing interest. On the other hand, debt relief can offer creditors partial or full payments against the balances owed.

It’s essential to understand that creditors are inclined to consider debt relief options when people fall behind on monthly installments or other solutions appear less favorable. There are wide-reaching debt relief options for those enduring economic hardship. These debt relief approaches can effectively cure negative revenue issues with a wide range of creditors.


Debt Relief Through Debt Management


The goal of a well-thought-out debt management plan involves paying unsecured balances at a reduced interest rate. Widely used by people with excessive credit card balances, this debt relief solution asks lenders to reduce interest rates and eliminate fees.

In some cases, a credit counseling agency may be tapped to field a single monthly payment and then distribute the funds to creditors. Established counselors typically have ongoing relationships with credit card corporations that help facilitate the process. However, missing a monthly installment can derail this debt relief solution.

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Debt Relief Through Settlement


There are some benefits to hiring a debt settlement company to negotiate with creditors on your behalf. In terms of personal debt relief, the idea of settling accounts for less than the amount owed can be very appealing. Unfortunately, debt settlement organizations sometimes use aggressive tactics that can backfire.

For example, a debt settlement company may advise people to stop paying creditors and divert money into a designated account. This tactic is typically designed to increase leverage over creditors in an effort to secure favorable terms. It’s important to keep in mind that people who take this advice usually accrue significant interest and late fees. This strategy proves risky because creditors are under no obligation to settle for less.

Debt Relief Through Bankruptcy


Obtaining debt relief through bankruptcy is widely considered the most extreme option. People drowning in debt with no viable solutions call lawyers or file pro se bankruptcy motions. Using bankruptcy laws may seem like a way to gain debt relief, but the ramifications remain less than palatable.

For instance, a bankruptcy filing negatively impacts credit scores and bars access to wide-reaching borrowing opportunities. It’s not uncommon for people who file for bankruptcy to experience these ramifications for 7-10 years. That’s how long the blemish can appear on one’s credit report. This is why other debt relief options should be exhausted before pursuing this option.


Take Debt Relief into Your Own Hands


Although people sometimes feel the need to work with a debt relief professional, local credit unions like Peach State have products that can accomplish your goals. One of the tried-and-true debt relief solutions involves consolidation.

Members of the credit union can apply for a loan to pay off outstanding balances thereby bringing wide-reaching debt under one roof. Credit unions rank among the best resources for this debt relief solution because they typically offer low interest rates and minimal processing fees. Here are the three most common debt consolidation solutions available to qualified members at Peach State.

  • Home Equity Loan: People who own their home outright or have adequate equity built up can apply for a low-interest home equity loan product such as a second mortgage or a home equity line of credit. Equity helps secure the loan, offering lower interest rates and fees. By streamlining numerous accounts into one manageable payment, debt relief can be achieved.
  • Low-Interest Credit Card: It may sound counterintuitive to pay off credit card debt by taking out new plastic. But local credit unions like Peach State generally offer their members lower rates than big corporations. Transferring multiple balances to one low-interest card provides debt relief from fast-accruing interest and fees.
  • Personal Loan: Taking out a personal loan to pay off other accounts remains a viable debt relief option. Although personal loans usually involve slightly higher interest rates than products backed by collateral, credit union rates are typically competitive. It’s worth reviewing the rates of credit cards and other outstanding loans, and comparing them to the rates for a personal loan.

The essential point is that everyday people can take matters into their own hands and conduct their own due diligence to secure a debt consolidation solution for their financial situation. This DIY approach supports a debt relief reset that funnels wide-reaching obligations into one reliable monthly payment and avoids bankruptcy and other costly debt relief strategies.

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Debt Relief Strategies to Avoid


Although economic hardships cause emotional distress, it’s crucial to employ sound financial debt relief planning. When stress overwhelms reason, people sometimes make missteps that worsen their situations. These include the following.

  • Draining retirement accounts to pay off creditors.
  • Taking out a home equity loan when the numbers indicate repayment remains uncertain.
  • Paying unsecured debts first such as credit cards instead of secured debts such as your car loan or mortgage.

Too many people feel pressured to do what’s the creditors’ best interest and as opposed to their own. Rather than do what is expedient to quiet the phone calls, text messages, and seemingly threatening collection letters, step back and make a debt relief plan. People should proceed with a debt relief plan that serves their long-term financial and personal goals only after they’ve weighed all of the available options.


How to Get Debt Relief Help


Getting help has never been easier. Consider getting a free copy of your credit history from the major reporting organizations. Fix any curable issues to stabilize your FICO score as much as possible, given your current circumstances. Make a full accounting of the outstanding debts you wish to consolidate and schedule an appointment with a Peach State Lending Specialist. We’re here to help!

For more debt relief solutions, review our "Debt Consolidation: Expectations vs. Reality" complete guide!

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