There are different types of debt elimination programs that could be used by the consumer who has accumulated substantial debt so that it has become very hard to come up with the regular payments.  This usually happens for those kinds of loans that are saddled with high interest rates, such as payday loans and credit cards.  These are debt settlement plans, Chapter 7 or Chapter 13 bankruptcies, and debt management plans.

Debt elimination programs that are designed for managing debt usually concentrate on negotiating for affordable payments to the credit companies without having to request for a decrease in the outstanding balance.  This specific strategy has the advantage of doing away with the annoying phone calls from collectors because the main concept is to negotiate for a feasible repayment schedule that is easy on the borrower’s budget.   The negotiations could be made by a third party that often requires an upfront fee but consumers should be warned that  that some companies have arrangements with the creditors where they are given a certain percentage of what is collected from the borrower.  It may be possible that the service provider may agree to a payment schedule that is not exactly the best for the consumer.

Meanwhile, debt elimination programs where a big chunk of the outstanding balance is forgiven are the favorite of many consumers because of the savings that they take advantage of.  However, the credit card company may only agree to this kind of condition if the unpaid amount has reached gigantic proportions.  The main point is that the instead of collecting nothing in the event that the debtor is successful in filing for bankruptcy, the creditors may consent to a large reduction in the payment.  The reduction could be as high as 60 percent but borrowers should also be careful with the companies that they are dealing with, particularly those that collect large upfront fees. 

The debt elimination programs that should be the last options to consider involve the filing for Chapter 7 or Chapter 13 bankruptcy.  In Chapter 7, the debtor can write off the loans if his or her income is less than the state median and he or she does not have non-exempt assets.  Chapter 13 is for those who do not qualify for Chapter 7.  In this kind of bankruptcy, the borrower can repay his or her debts for a period of three to five years and after this period, the credit card debt can be erased. For more details check out http://bestdebtreductionstrategies.com.

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Consolidated credit counseling is provided for people who have several loans and the main strategy is to consolidate them into a single debt that carries a lower interest rate.  The duration or term of the new loan may be longer than the previous ones but the amount that you need to come up with each month will be substantially reduced when compared with the total amount that you previously had to pay with the previous debts.  Another advantage of the loans that could be had through the help of consolidated credit counseling is that it would be easier for you to manage a single payment and deadline every month in contrast to having several due dates and payments to monitor with the older loans.  However, it is important to be careful about the consolidated loan because it usually requires a collateral such as your home.  If this is the case, you could lose your home in the event that you can no longer come up with the monthly payments and you default on your loan.

These consolidated credit counseling companies can also offer the vital service of negotiating with your creditors, especially the providers of credit cards, so that they will agree to forgiving a substantial portion of the outstanding amount that is due.  This amazing feat is actually possible because creditors are aware that when the borrower successfully files for bankruptcy, they would stand to gain nothing.  However, consumers have to be careful because there are some unscrupulous companies and individuals who are exploiting this trend to surprise people with such kinds of promises for their own benefits.  Some of them can charge as high as $3,000 right from the start.  And a number of these companies and individuals have no intention to really provide the service that they are offering but instead they will soon vanish with the money that they have collected.

Another unwanted effect of using the services of consolidated credit counseling companies is the fact that it could affect your credit rating.  Some lenders report debtors who have negotiated settlements through the help of these companies as delinquent or late, which brings down their credit scores.  Luckily, some of the lenders simply report to the credit bureaus that borrowers who have negotiated settlements are undergoing credit counseling.  Moreover, credit bureaus no longer take into consideration the report that the borrower is undergoing credit counseling when computing credit scores.  Therefore, this will depend on your particular lender because some do report you as delinquent or late even while you have negotiated a settlement with them. More information can be found by clicking here

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