Credit Unions have a range of services for consumers that traditional banks rarely offer. Customer service and personal attention is usually the strongest benefit offered by local credit unions. When it comes to debt relief services credit unions have programs to assist you.
There are 6 common forms of debt relief services and each is set up to address specific debt problems as described below.
Overview of Debt Settlement
Debt settlement is a legitimate debt relief service that has been used by consumers and businesses for over a decade. The concept is fairly basic. When a consumer or business is unable to pay a debt due to financial hardship often bankruptcy is their course of action. For unsecured creditors this is a undesirable solution. Understand that in bankruptcy court secured creditors such as those that pertain to home loans, auto loans and other federal debts like taxes and student loans must be paid off first. If the consumer or business has money remaining only then will unsecured creditors have the possibility of having their debts paid. How many people filing bankruptcy have enough money to pay off all of their assets and then pay off their credit cards? Well they would not be filing for bankruptcy if that were the case right. The bottom line is that unsecured creditors such as credit card companies, medical bills, gas cards, store cards and other unsecured money lenders would rather avoid bankruptcy court. This is where the negotiation and settlement solution solution comes in.
Consumers and businesses who have a verifiable financial hardship, such as the loss of income due to injury, job loss, wage decreases, divorce and are unable to pay their unsecured creditors could be candidates for a debt reduction using a settlement process.
You can approach your creditors and ask them to reduce your debts significantly and if they do you will be able to pay them that reduced amount immediately. This allows you to settle that debt for a fraction of what you owe, the creditor recovers at least a portion of what is owed to them and you both avoid the undesirable consequences of bankruptcy court.
Debt Settlement Pros:
Unsecured debts can be significantly reduced.
It provides an opportunity to avoid bankruptcy.
Debt Settlement Cons:
Settlement only works with unsecured debts.
A creditor does NOT have to accept your reduction offer. It is a negotiation not a gaurantee.
Whenever you pay off a debt for less than what you owe it will impact your credit rating.
Once you settle debts on a credit card that card will often be closed.
Credit Counseling Pros: Credit counseling services follow strict creditor guidelines, which map out an alternate plan to resolve your debt load. Interest rate reductions, elimination of over the limit and late fees, and the re-aging of some accounts that are behind denote some of the benefits afforded by some credit counseling agencies. Many services can stop creditor calls within 30-90 days if you are behind. Most programs do not impact your actual credit score, although there are some collateral effects noted below. Credit counseling services generally have very strong financial education programs that are part of their service.
Credit Counseling Cons: Since a large majority of banks offer no real monthly payment reduction, credit counseling services are for those clients who can afford to make a regular monthly payments on their credit cards without using them. If you are in need of reducing your monthly outgoing payments, then credit counseling is probably not for you. In regards to the impact on your credit worthiness; at best, your credit will read that you are using a third party agency to resolve your debt which could impact your ability to get financing. At worst, there will be a stipulation on your credit which disables you from receiving any form of credit for the length of time you are on the program. If this is the case and you attempt to finance a vehicle in several years and are still on the program, you will be denied. Credit counseling can take up to 3-7 years to complete, making it one of the longest debt relief solutions to complete. Finally, credit counseling companies are compensated by the creditors that you owe money to. This puts in question who their service is loyal to, you or the creditor?
Debt Management Pros: Credit counseling services follow strict creditor guidelines, which map out an alternate plan to resolve your debt load. Generally these plans are established and agreed upon between the debt management company and your creditors therefore there is some certainty that the benefits they promise they can deliver on. Interest rate reductions, elimination of over the limit and late fees, and the re-aging of some accounts that are late are some of the benefits debt management programs feature. Many services can also stop creditor calls from creditors you are paying through their program. Most debt management programs do not impact your actual credit score, although there are some collateral effects noted below. Debt Mangement services generally have very strong financial education programs that are part of their service.
Debt Management Cons: In debt management your creditors are not reducing your actual debt amount, they are just "stopping the bleeding" until you can pay them back. This means your monthly payment to pay off your debts will be nearly the same as what you currently pay. If you need to reduce your monthly expenses and payments then debt management is probably not for you. You will not be able to use credit cards that are in the program. The impact on your credit worthiness; at best, your credit will read that you are using a third party agency to resolve your debt which could impact your ability to get financing. At worst, there will be a mark on your credit report which disables you from receiving any form of credit for the length of time you are in the debt management program. Debt management programs can take up to 3-7 years to complete, making them one of the longest debt relief solutions to complete. Finally, debt management companies are compensated by the creditors that you owe money to. This puts in question who they are loyal to, you or the creditor?
If you are dealing with a potential home foreclosure then you need a special type of assistance not offered by traditional debt relief programs. We recommend using iHomesaver to help you save your home. iHomesaver has a network of home foreclosure prevention services that cover every state in the country so you can get help from a service that works with the laws specific to your state.
iHomesaver simplifies the process of taking advantage of the many homeowner bailout plans being offered to home owners today.
Debt Consolidation Loan Pros:
Possibly the fastest way to eliminate all types of debt. By using the equity in your home one can secure a loan at a low interest rate and pay off all of their high interest rate debts (credit cards) in a matter of weeks! This stops the creditor calls, helps you become debt free fast and can reduce your monthly expenses significantly.
Debt Consolidation Loan Cons:
If you are in debt and are having a difficult time paying your bills this means your income is not sufficient to meet you debt obligations. Taking out a loan will not change this! Worse is that if you do not pay your home equity loan on time the lender could foreclose on your home. Some banks start foreclosure proceedings after only 1 missed payment! Consolidation loans are best for consumers who have solid employment, a large amount of equity to draw upon who have simply made a mistake and overspent on their credit cards. Consolidation loans are highly risky for consumers who are lacking income and solid employment.
Getting the Facts is always free and confidential.
In 5 minutes you can be on your way to putting a quick end to your debts and avoid the stigma of a bankruptcy. Complete the form below and a debt relief analyst will work with you to assess your situation and work out a program to help free you of your debts. There is NO obligation, pressure or cost for this analysis. This is NOT a loan offer.
Credit Unions 101 is a referal service that puts
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in receiving quotes and consultations from. Credit Unions 101 is not an end provider
of debt relief services nor are we part of any agreement or contract of services you may commit to with a debt relief company.
The content provided on CreditUnions 101.com is a general description of services. Actual benefits, costs and features of debt relief services will vary from company to company. It is up to you, the consumer to consult with the service provider directly and or any professional you deem appropriate to educate yourself on all the details of a debt relief program before making any final decision.
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Credit Unions 101 is not providing legal, financial, investing or any other professional advice. Although we believe the content on this website to be acurrate it is general in nature and does not fully describe the complex details of every debt situation or program you may decide to use. It is recommended that you always contact a professional in the appropriate field for advice before making any decision.
In no case should you, the visitor, believe that there is any gaurantee that a you will not have to file bankruptcy now or in the future. This type of claim is not possible since bankruptcy is YOUR decision. * Up to 60% Debt reductions shown are real examples of some of the higher potential debt reductions possible. The debt negotiation industry averages about a 50% debt reduction, plus fees for their service, your results will vary. Credit Unions 101 is not the end provider of debt relief service thus we do not gaurantee any debt reduction amount, this will be estimated by the debt relief company you choose to use.
Important Issues to Consider when Evaluating Debt Settlement or Negotiation Programs
Consumers should not use a debt settlement service if they are able to pay their minimum balances due each month. Nor should the join if they do not have a legitmate financial hardship.
1) late fees, penalties, and interest will continue to accrue on the consumer’s debt until the consumer’s creditors accept and receive a settlement; (2) a consumer’s creditors may still sue to collect on the debts and garnish the consumer’s wages; (3) interest rates applicable to the consumer’s debt may increase; (4) any money a consumer saves in negotiating a settlement with a creditor must be treated as income for tax purposes; and (5) a debt settled for less than the full amount owed may result in a negative notation on the consumer’s credit report.
Credit Unions 101 is not acting as a lender or broker.
The information provided by you to Credit Unions 101 is not an application
for a mortgage loan, nor is it used to pre-qualify you with any
lender. If you are contacted by a lender or broker advertising within
our network, your quoted rate may be higher, depending on your property's
location, your credit score, your loan-to-value ratio, debt-to-income
ratio, and other factors. Not available in all states.
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