Frequently Asked Questions about Debt Relief

Here are the answers to the most commonly asked questions about debt relief. Learn about the most effective debt solutions and the different types of debt here.

What is the most effective form of debt relief?

Debt relief comes in a variety of forms, all of which can be very effective. The debt solution that works best for you will depend on your personal characteristics and the nature of your debt. For example, if you own a home and know you will make payments on time, a home equity debt consolidation loan might work for you. On the other hand, if you want a less risky form of relief from debt that concentrates on improving high interest rates, a professional debt consolidation service might do you more good.

Is all debt bad debt?

Some forms of debt are more pernicious than others. Typically, the types of obligations from which consumers most desperately need debt relief are unsecured debts. These debts are not linked to collateral, or property, and thus tend to have extremely high interest rates. Credit cards are one example of unsecured debts. Because unsecured debts tend to be so expensive, they are usually much more damaging than secured debts, such as car loans, mortgage loans, etc.

If I consolidate my debts, who pays my creditors?

Technically speaking, the debt consolidation service will actually send the money to your creditors. However, the money for these payments comes from you, the borrower. As long as you make the monthly payment to your debt consolidation service, your creditors will always get paid on time. From the payment you send each month, the consolidation service will deduct a small administrative fee to cover their costs before passing on the remaining money to your creditors.

What will professional debt relief do to my monthly payments?

How your monthly payment changes after you consolidate will depend on your creditors, your consolidation company, and your previous interest rates. In most cases, consolidation can improve your monthly payments to make them more manageable and less draining on your budget. At the very least, your monthly payments will be easier to handle because you will only have one bill to pay instead of several.

Is debt relief consolidation expensive?

Considering the money debt consolidation can potentially save you, the cost of the service seems minimal in comparison. All consolidation companies charge different fees for their debt relief services, but a typical approach is to charge a one-time commission fee and then a recurring monthly fee to cover administrative expenses. The commission is usually around the same amount as your first monthly payment. The monthly administrative expense could be either a flat fee or a per-creditor charge.