A significant number of Americans find themselves burdened by various financial debts that they are eager to eliminate.
Whether it is student loans, credit card debts, or household debts, people look forward to removing them from their list of worries forever.
One way of eliminating some of the debts is through debt relief programs, which could help those who are drowning in massive amounts of debt.
However, debt relief programs, which are also called debt settlement companies, might not be ideal to those who have access to a debt, consolidation loan, or other means to pay it off.
With this in mind, GOBankingRates provided five key signs to help people understand if they are eligible for debt relief.
Tons of Unsecured Debt
One of the most obvious signs people need to manage their debt through a debt relief program is the fact that they have a huge amount of unsecured debt.
Creditors extending secured loans would typically attempt to recover the collateral securing the loan before they renegotiate the debt terms.
Normally, those recommended undergoing a debt relief program have issues regarding credit cards, personal loans, medical bills, and other unsecured debt.
Issue on Minimum Payments
Another factor where people should consider debt relief is if they are having a hard time making minimum debt payments.
Having struggles paying minimum debt payments could eventually lead to financial duress and financial insolvency.
High Debt-to-Income Ratio
While it is beneficial to cut spending and living within one's means, it is easier said than done, especially if people use credit cards to make their purchases and spending.
Once someone incurs credit card debt, it could increase due to overspending, accumulating interest, or both, resulting in a high debt-to-income (DTI) ratio.
In such cases, a debt relief program would be beneficial in rebalancing one's DTI ratio.
Meeting Income Requirements
In order to qualify for debt relief, one must be able to make a certain amount of payments on one's debts every month in addition to covering any fees related to the debt relief program.
However, if someone has a high income, and thus technically able to pay off debts, they might not be able to qualify according to the debt relief company's requirements.
Risk-Taking Involved
Finally, one issue that people looking to apply for a debt relief program need to know is that there will always be a risk involved.
Approaches in debt relief include the applicant stopping payments on their debt in order for the debt relief company to negotiate one's balances to a more manageable amount, often at the expense of one's credit scores and future financial opportunities.
There is also no guarantee if the debt settlement company would be able to successfully negotiate one's debt, which could worsen one's credit score.
Shopping Around is Important
In conclusion, debt relief programs could be helpful for those who would qualify, but it could not be said for everyone else. Those seeking to apply are advised to shop around and vet companies offering such programs before committing.
On the other hand, people could also explore other alternatives to manage one's debt, such as debt consolidation or bankruptcy.
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