How to choose a debt relief service

Investigations

KNOXVILLE, Tenn. (WATE) – If you are in debt, there are several types of debt relief services available and it may be difficult to decide which program is right for you.

The biggest drivers of debt are mortgage payments and student loans. However, we also carry credit card, auto and medical debt. Debt is overwhelming for some people.

Three options come up when searching for debt relief programs: debt consolidation, debt settlement and debt management. The pros and cons of these programs vary.

Dr. Ann Berry is a consumer economics specialist at UT. Getting out of debt she says takes time. She says under debt consolidation combining debts from several creditors, then taking out a single loan to pay works for some families.

“People don’t realize you are putting all of your debts into one. But it’s a loan that you are going to have to repay. You can get it through a bank or other financial institutions or you can use your home as collateral,” Berry said.

When you check the internet, several debt settlement plan programs appear. Debt settlement allows you to pay a lump sum that’s typically less than the amount you owe to resolve or settle your debt.

“Usually, debt settlement is what you negotiate to get debts lower than what you owe,” Berry said.

Berry says debt settlement is a service that’s typically offered by third-party companies.

“Sometimes they can be risky,” she said. “They might tell you to stop paying your creditors.”

The risk adds up when one or two of your creditors stop getting their money from you and your settlement agency.

“If you are not paying your creditors and they’re not, then the creditor may sue you and may not wait for the payments to come through,” she said.

Adam Jones explained how he got out of debt through a credit counseling debt management program. He paid down his outstanding debt through monthly deposits as his agency negotiated a lower interest rate. It took time — more than 4 years — to climb his way out of debt.

“We’re free. It’s taken a lot of weight off our our shoulders,” said Jones.

Whichever debt relief program you choose is up to you, but the sooner you start, the better.

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