Most people in the United States are riddled with debt, such as student loans or credit card debt. When you have humongous amounts of debt, it can be challenging to get out from under them. Debt relief programs can help you reduce your debts to creditors through debt settlement. Debt settlement means a debt relief firm negotiates a settlement that allows you to pay a portion of your debt. They could also change the terms of your debts, but you must be eligible. Do you qualify for debt relief? Read on to find out.
Financial Hardship
The first and foremost condition to qualify for debt relief is that you must be in dire financial straits due to your debts. Requirements for debt relief vary from company to company.
However, many companies will only find you eligible if your economic hardship or debt is the result of medical bills, loss of income, or divorce. Your debt has to be significant enough that you are unable to pay it in five years even if you were to dramatically cut spending.
Your total unsecured debt must also be half or more of your gross income.
You do not qualify for debt relief simply because you have been irresponsible with your bills. It must be a legitimate financial hardship typically caused by issues you have little control over, such as illness. If you would rather find a solution with your creditors than declare bankruptcy, debt settlement is a good idea for you.
Getting Out Of Debt
To qualify for debt relief, you must be committed to getting out of debt. You must have tried paying off the debt yourself but with poor results. If you are going to be involved with a credit relief program, you must show them that you are committed to paying off the debt.
Therefore, you must prove to the debt settlement company that you have been making an effort to pay off the debts. Debt relief programs are an aggressive approach to clearing your debts and will take a toll on you. If your commitment wavers when it gets tough, you will not succeed.
However, if you are committed, a credit relief program can help you get out of debt faster and cheaper than any other option.
Type of Debt
To qualify for debt relief, you must possess a type of debt whose terms are subject to change. The good news is that most unsecured loans can be negotiated. These include credit cards, lines of credit, personal loans, store cards, financing contracts, and miscellaneous bills.
Secured loans like mortgages are very challenging to negotiate unless the lending institution is willing. The biggest debt relief discounts are for credit card debt. So, if most of your debt comprises credit card debt, you probably qualify for debt relief.
Therefore, before contacting a debt settlement company, ensure your debt has negotiable terms.
Credit Score
Your ability to repay the loan will determine whether you qualify for debt relief. Your credit score is the most important metric for judging your capacity to pay back the debt. Most firms will accept a credit score of between 300 and 580.
Generally speaking, a debt settlement company will evaluate your monthly budget and determine whether you can pay 2% of your total debt every month. Having a stable income will hence be a defining factor in whether you qualify for debt relief.
Anything lower than 1.5% payment of your debt means a long repayment period which may result in frustration.
Eligibility For Debt Relief
Debt relief can help you pay off your debts and improve your financial situation. Do you qualify for debt relief? The above factors should give you a good idea of whether you do. Consider them before contacting a debt relief company.
