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What Exactly is a Debt Relief?

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Being in debt is an unsettling situation, and you might be questioning how to get yourself out of it as quickly as possible. So, the term debt relief may sound like music to your ears. 

But, what exactly is debt relief?

The Definition –

It is a very general term, which refers to the reorganization or reduction of debt via any means. This is achieved by providing the indebted party with temporary assistance, which either relieves them from their debt entirely or partially. 

This relief can take a variety of forms, including reducing the overall outstanding bill, achieving a lower interest rate, and extending the loan’s term, resulting in smaller payments over a longer period. 

Usually, debt relief is offered to those with large outstanding debts, who creditors perceive to be in severe financial turmoil. 

It is available not only to individuals but also to businesses and municipalities. 

You can learn more about debt relief from Freedom Debt Relief

Different Types-

Debt relief can be achieved in a number of different ways, such as filing for bankruptcy, debt settlements, debt management planning, and DIY debt relief. 

Filing for bankruptcy is the most beneficial option for those who feel they will be unable to repay their debts as planned in a debt settlement or debt management scheme. Debt relief via bankruptcy is most suited to those with credit card or medical debts and unsecured personal loans. Those with outstanding owed taxed and child support debts are unlikely to benefit from filing for bankruptcy. 

Debt management plans are the best options for those with management outstanding bills. When you apply for debt management, you will be granted the opportunity to pay back loans with a reduced interest rate. Typically, you pay a fixed fee each month until the outstanding balance has been paid off. 

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Debt settlements are unsuitable for a large number of people as the process can be unstable, unpredictable, and payments are taken out of your control. Usually, debt settlements are only advisable if you have large, unplayable debts, but do not qualify for bankruptcy. 

It is also possible to take control of your debts yourself; this is called DIY. While this method might save time on applications and remove the risk of filing for debt settlement, DIY  requires in-depth research and dedication. 

The Downsides –

The schemes can be invaluable to many people who are dealing with overwhelming repayments. However, that’s not to say there aren’t some disadvantages to seeking out it.

Firstly, there are often restrictions placed on who will be accepted for bankruptcy and debt management plans. Therefore, if you don’t qualify, you may be left having to file for a debt settlement. 

Additionally, if your financial circumstances change and you feel you can no longer pay the agreed monthly amount to your creditors, you will still be charged. 

Finally, if you file for a debt relief order, evidence of this will remain on your credit file for up to six years. This information could therefore impact your ability to get a mortgage or credit in the future. On the other hand however, odds are your credit history is already problematic if debt relief is a viable option for your situation.

The Bottom Line

Debt relief plans have helped so many people in their time of financial crisis, and these plans have a number of benefits, including reduced interest rates and extending the repayment term of your loans. However, there are also a number of risks and disadvantages to debt relief that should be considered before applying.

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If you’re still wondering “What exactly is debt relief?” and think you could benefit from learning about filing for bankruptcy or arranging a debt management plan, you can find out more information from freedomdebtrelief.com.