Bad Credit Debt Relief

You Do Have Options

If you are unfamiliar with your debt help options, finding bad credit debt relief probably seems impossible. And although there are some very effective debt relief options available to you if you have stellar credit, the fact is that most folks who are experiencing debt trouble do not even have what would be considered 'good credit'.

Now, if you are like most people who find themselves deep in consumer debt, your first thoughts immediately turn towards borrowing more money to pay off your existing debts. And you are not necessarily wrong to think along these lines.

For instance, let's say you could borrow money at 5%, using perhaps a home loan, a personal loan or by transferring your credit card debts onto a new lower interest card. If you then used these new funds to retire the unsecured debts that you are currently paying 19% interest (or more) on, you would certainly be on the right track. The problem is, and I likely don't even have to tell you this, is that when you already have too much debt and you have bad credit, getting a new low interest loan is, well, difficult to say the least.

Not all hope is lost however. There are some debt help options that are available to you regardless of your credit. Here is a look at three bad credit debt relief options that you can utilize right now.

Bad Credit Debt Relief Option Number 1: Credit Counseling

The first thing you should do is contact a credit counseling company. The most important things they can offer you are a free assessment of your financial situation and a budget analysis and preparation session. These two things will then become the foundation upon which you build your way out of debt.

Following that, if your counselor feels you would benefit from a Debt Management Program (DMP), they can discuss how you could benefit from such a program. Depending on your debt situation, credit counseling may be all that you need to get back on track. If not, then the next option to consider would be DMP or debt consolidation program as it is also known.

Bad Credit Debt Relief Option Number 2: Debt Consolidation

Once you sign up for a debt consolidation program, your debt counselor will pick up where they left off in option #1. She/he will prepare a detailed personal budget for you, and prioritize your monthly payments. Then the counselor will begin to negotiate with your unsecured creditors to get your interest rates on your debts as low as possible (as well as getting any penalties and late fees removed from your credit card accounts). Your debt payment amounts will be reworked to not only fit into your new budget, but also get you out of debt in about 4 to 6 years. Each month you will make one payment to the credit counseling agency, who will in turn make sure that your creditors are paid accordingly.

Unfortunately for some people, even a debt consolidation program is not going to help their situation. Usually these people are suffering from financial hardship (job loss, illness, divorce) and are well behind on paying their debts. If this describes you, then debt settlement may be a better option.

Bad Credit Debt Relief Option Number 3: Debt Settlement

If you already have bad credit, and you are behind on many of your debt payments, then debt settlement might be the perfect option for you. Unlike debt consolidation, where the goal is to reduce your interest charges etc. and pay off your debts in 4-6 years, the goal of a debt settlement plan is to reduce the actual amount of debt you owe. In most cases debt can be reduced by 50%, and in some cases by as much as 70%. Sound attractive?

Here's how it will work for you.

Debt settlement is an appropriate bad credit debt relief option in that, if you already have bad credit, one of the potential downsides of such a program will not be relevant. (I'll touch on this in a bit.) Now, once you begin a debt settlement program you will stop paying your creditors. If you decide to settle your debts yourself, you will call your creditors and explain that you cannot pay off the debts in full but would like to negotiate a reduced amount. Or, if you hire a professional debt negotiator, they can handle the process for you from start to finish.

Instead of making payments to your creditors each month (most of which would have gone towards interest charges) you will instead start depositing money into a savings account which will grow over time and eventually be used to settle your debts. As you (or your debt negotiation professional) reach settlement agreements with your creditors, you will use the money from this account to pay off the debts. There are other ways of raising money for settlements as well which an experienced negotiator can discuss with you.

Keep in mind, and I touched on this above, that once you stop making your debt payments, both your credit score and your credit report will suffer. (This is a major pitfall for people who still have decent credit and are looking for debt relief options.) But, if you already have bad credit and you are considering debt settlement as a bankruptcy alternative, this will not likely be as much of a concern as it would be if you had good credit.

There are no miracle cures for getting out of debt. It takes a plan and perseverance. As I recommended earlier, the first step in you bad credit debt relief journey should be to get a free financial analysis (make sure it is a 'no obligation' analysis) and cost savings analysis from a reputable debt relief company.