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Debt Relief

Frequently asked questions regarding debt related personal finance topics

Q: Can I negotiate credit card debt on my own?

Many experts do suggest trying first to negotiate debt reduction before utilizing a debt relief company. Contact the credit card company, explain your situation, and work together to explore alternatives. Though the credit card company is under no legal obligation to reduce your debt, starting a dialog early will improve your chances of negotiating a plan to help get you through difficult times.

Q: What are my options for affordable debt consolidation?

For homeowners, the lowest cost option is usually a home equity loan. Equity loans, though they often come with various fees attached, offer lower interest rates than most other loan products, and come with the added benefit of tax deductibility. The other primary debt consolidation loan option is found in personal loans, which have higher rates, but no fees. Personal loans provide a sensible option particularly in situations where a consumer only requires a relatively small loan amount. For consumers who are struggling, making the loan option unfeasible, one option is to contact a nonprofit credit counseling agency that offers free debt consolidation services.

Q: Can a collection agency sue for a debt?

Collection agencies can file a lawsuit in order to collect on a debt. In most cases, collection agencies will only take this action if they have purchased the bad debt from the originating lender.

Q: Can I get a debt consolidation loan without owning a home?

Homeownership is not required to get a debt consolidation loan, but it does limit the available options. The loan option available to non-homeowners to consolidate debts is a personal loan.

Q: Are government debt consolidation loans available?

The government does not have programs to offer conventional debt consolidation loans. The U.S. Department of Education does, however, have a program to consolidate existing federal student loan debt. Eligible for consolidation are all federally insured student loans, such as Stafford loans.

Q: Is free credit counseling available?

There are several well respected nonprofit companies that offer free credit counseling services. The National Foundation For Credit Counseling (NFCC) and the Association of Independent Consumer Credit Counseling Agencies (AICCCA) sites enable consumers to easily locate free or low cost providers of credit counseling services. Consumer Credit Counseling Services is an example of a well established, nonprofit, agency that is free of charge.

Q: What are the fees for a debt consolidation or debt settlement service?

The term debt consolidation, for most of us, equates to a debt consolidation loan. However, debt consolidation can also refer to a service, one offered by certain reputable credit counseling agencies. To find a nonprofit or low cost credit counseling company, search The National Foundation For Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA). Debt settlement, on the other hand, is a service not provided by traditional credit counseling agencies. A plethora of small companies have sprung up in recent years offering debt settlement services, and no consistent industry wide cost structure has become apparent. Some companies may charge a percentage of the total debt- others may charge a percentage of the total savings. Consumers need to strongly consider all debt relief options before electing for a debt settlement service.

Q: What kinds of debt relief are available to people with bad credit?

The three main types of debt relief services are: credit counseling, debt settlement, and debt management. A debt consolidation loan is designed to lower a consumer's monthly payment on their debt, while ideally getting out of debt quicker. While debt consolidation is a sensible debt relief strategy, people with bad credit will often have difficulty getting access to this option if they have a poor credit score.

Q: Can I get a debt consolidation loan with bad credit?

In today's lending environment, it's extremely difficult for people with bad credit to get approved for a debt consolidation loan. Lenders simply are not taking on excessive risk. If you have an existing relationship with a financial institution it always makes good sense to talk to them first as they have a vested interest in your financial welfare. Consumers with poor credit and in need of debt relief should read up on these available services (link to debt relief).