Debt Relief Plan 2023
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Being in debt can be very frustrating and depressing, especially if the debt comes with a high interest rate considering the fact current situation the world is in, that of Covid-19 pandemic. Are you one of the millions of Americans who have incurred serious debt, especially if it has high-interest rate attached to it?
Well, you don’t have to worry much as this article discusses a debt relief plan and how it can help you come out of debt in 2023. The debt relief plan can also help you to manage your payments, noting that it might not be suitable for everyone as such you have to understand or this relief plan works and how it affects your finances.
What is a Debt Relief Plan?
A debt relief plan is designed to help you come out of debt by making your payments affordable. The debt relief may involve reducing the total you owe your creditor, it might also involve modification of the repayment term by lowering the interest rate.
As soon as you decide on which debt relief plan is right for you, be sure to make payments by the terms of the new agreement of your debt relief.
What are the various types of Debt relief plans in 2023?
Knowing which solution is best for you anchors on the amount you are owing, the interest rate, and your overall credit.
Here we are going to consider five examples of debt relief plans;
- Debt forgiveness
- Debt management
- Credit counselling
- Debt settlement
- Debt consolidation
Debt forgiveness is a type of debt relief involving a partial or total cancellation of the debt owed. Debt forgiveness options like; full forgiveness (occurs in rare cases) and forgiveness for less than the original amount. Also, a lower amount can be negotiated by a debt settlement company to resolve your debt. You can also directly negotiate with the lender for debt forgiveness.
The good news is that special programs are established to help those experiencing financial problems. You can also apply through your lender for these debt forgiveness programs if you are having problems in paying your debts.
A debt management plan is a type of debt relief plan that involves an agreement addressing outstanding debts owed to a creditor by a debtor. The debt management plan (DMP) is designed to reduce unsecured and outstanding debts to allow a debtor to take control of his finances.
It provides room for extended repayment terms, possible complete reduction in the debt, and finally lower interest rates. For consumers, the debt management plan is usually negotiated by a credit counselling agency that addresses the debt by helping the debtor to set up a budget on the basis of their regular income and expenditures which usually involves one regular bill payment that is given across the creditor.
The money is then used to pay your debts based on the payment schedule that was set up with your creditor.
Credit counselling, also known as debt counselling in the UK, credit counselling is a process adopted to assist a debtor with debt settlement either through education or on how to set a budget and also through the use of various tools to reduce debt or eliminate debt.
This plan is usually done by credit counselling agencies authorized through the contract to negotiate with creditors on behalf of a debtor incapable of repaying their debt.
In the United States, the NFCC (National Foundation for Credit Counseling) was founded in 1951, and credit counselling which is the present-day practice of NFCC was initiated by creditor banks and credit card companies to combat personal bankruptcies or debts.
Some of these agencies charge a certain fee while others don’t. Note also that credit counselling varies by country.
Debt settlement or negotiation is a type of debt relief that has to do with the negotiation between a debtor and his creditor or lender for the overall debt to be reduced in exchange for a lesser payment. It’s only unsecured debts that be settled, such unsecured debts include; credit card bills, medical bills etc.
In the United Kingdom, for example, a legal practitioner or arbitrator to carried out the negotiations with the creditor on behalf of the debtor. These creditors usually accept a reduction in the amount in the final payment, referred to as the “full and final payment”.
However, the debtor can carry out this negotiation by themselves, as it saves them the money they would have used to acquire a legal entity or debt settlement company. Still, it has its own disadvantages as it puts the debtor at the risk of being sued often by the creditor.
Debt consolidation is a type of debt relief that involves taking out one loan to pay off many debts. Put simply, it is the integration of several debts into an integral whole. The debt consolidation plan allows a debtor to use the money from consolidation loan to repay the new account as they no longer make multiple payments monthly.
The debt consolidation plan is virtually impossible to achieve as the debtor has to meet the creditor’s eligibility requirements in accordance with application for a new credit. If the debt acquired by a debtor comprises of credit card bills, they may consider using the balance transfer card to consolidate it.
Summary- Debt Relief Plan 2023
Falling into debt can be very depressing especially considering the present pandemic the world is facing. But the debt relief plans which have been discussed in this article can help set you free from debt in 2023 through the different types of debt relief, if applied.
Now, over to you. What doy you think on the list we made on Debt Relief Plan 2023? Kindly use the comment section to let us know what you think and we will do well to respond. If it is an addition to the above “Debt Relief Plan 2023”, we will do well to add it when we update the content.