Are Debt Relief Companies a Good Option?

Debt relief companies can be a viable option for many consumers. However, this depends more so on the consumer’s current financial standing. Just because you qualify for a particular option or have an option available to you, does not mean that it’s the best thing for your particular situation. For many consumers, debt relief companies help them relieve their debt burden and save money off the principal balance and that is a tremendous help to their life. Whether that is the case for your or not will depend on your situation and your available options.

Debt Consolidation vs. Debt Relief Programs vs. Bankruptcy

Taking out a debt consolidation loan or enrolling in a debt relief program (these options are very different) is definitely not the correct choice for everyone. However, since the Bankruptcy Abuse Prevention and Consumer Protection ACT (BAPCA) was passed in 2005, it has become much more difficult for consumers undergoing serious financial hardship to receive financial relief if they do not qualify for a Chapter 7. So, working with a debt relief company may be a good choice if you fall into this middle ground and do not want to file for bankruptcy or don’t have the ability to do so. A debt consolidation loan may be a good option for a consumer with a higher credit score, that is maintaining and will be able to pay off their debt on their own. If you are struggling to keep up with payments, working with a debt relief company is probably a better option than a debt consolidation loan and it’ll allow you to bypass the bankruptcy option altogether.

Should You Consider a Home Equity Loan?

There are some circumstances where you might consider using a home equity loan. If you have available equity in your home and qualify for a good interest rate (rates have come down recently and should continue to decline for some time), you should definitely make use of the available equity in your home. The opportunity cost of taking out equity from your home is fantastic right now and there probably isn’t a better time to consider doing this, in order to pay down high interest debt. However, equities loans have become a sparser in terms of offerings and they are harder to qualify for than they used to be.

Comparatively speaking, working with a debt relief company is going to be a good option for consumers looking to avoid bankruptcy and looking to avoid borrowing more money (which is likely how they got into trouble in the first place). Debt consolidation loans and HELOCs are useful financial tools but if you have substantial credit card debt and you have average credit they might not be the best option for you. This is why debt settlement options have become more popular in recent years. The drop in bankruptcy filings has scaled back and caused a boost to the debt settlement industry and other alternative options to help consumers eliminate debt.