Many debtors ultimately learn that credit counseling barely scratches the surface. However, debt settlement gets people out of debt considerably faster since it reduces both the debt principal and interest rate.
San Diego, CA (PRWEB) May 22, 2010
Debt Free League warns of major financial troubles up ahead for Americans with credit card debt. Not only did the U.S. unemployment rate rise to 9.9 percent in April. But, according to a Zillow report, in the first quarter more than one fifth of U.S. mortgage holders owed more than their homes were worth. As a result, millions of cardholders in need of debt relief will be turned down for debt consolidation loans.
Additionally, bankruptcy filings have hit a record high. According to the Administrative Office of the US Courts, U.S. bankruptcy filings rose 27 percent in the past 12 months ending March 31, 2010.
"Over 1.5 million consumers and businesses have filed bankruptcy. This is the biggest number of filings since 2005 before the Bankruptcy Abuse Prevention and Consumer Protection Act, a law that made it harder for consumers to file for bankruptcy," declares Gerardo Hernandez, Debt Free League Operations Director.
Despite the alarming numbers, Americans are determined to avoid bankruptcy and a 10-year sting on their credit reports. Hernandez indicates that instead, people are increasingly seeking assistance from a credit counselor or debt settlement company. However, he warns debt relief candidates to carefully weigh their bankruptcy alternatives.
Statistically, credit counseling is the least successful option. A Consumer Reports survey warns that credit counseling has a 21 percent completion rate, primarily because of the unbearable monthly payments often taxed on consumers by a debt management plan. Plus, the only debt consolidation it achieves is interest rate reduction.
Even Chapter 13 bankruptcy, which has a 33 percent completion rate, excels over credit counseling. Whereas, debt settlement has an even higher completion rate (45-50 percent) according to a study by the Association of Settlement Companies (TASC), which in 2009 settled $1.1 billion of consumer debts and saved $640 million for consumers.
Hernandez suggests a debt settlement company is a better option for consumers that can't make the high monthly payments of credit counseling debt management plans, which average 5-6 years to complete. He claims a debt settlement company can terminate a consumer debt in about half the time, while assisting a consumer with a lower monthly payment.
The Debt Free League executive adds, "Many debtors ultimately learn that credit counseling barely scratches the surface. However, debt settlement gets people out of debt considerably faster since it reduces both the debt principal and interest rate."
Debt Free League also cautions debt settlement candidates to compare the payments and fees of settlement service providers. The company has found that many charge exorbitant fees, typically 15 percent or greater of a consumer's total enrolled debt. They also collect their fees upfront.
Regrettably, the two practices cause much of a consumer's monthly contribution to be allocated toward fees instead of funding settlements.
In comparison, the debt negotiation service fee charged by Debt Free League is only 10 percent of a client's total enrolled debt. The company also allows clients to spread the low fee over a period of 12-18 months.
The above pricing model has allowed Debt Free League clients to build up settlement funds in their escrow accounts far more quickly. The win-win solution also positions the company's in-house debt negotiation specialists to reach much faster settlements with creditors.
About Debt Free League:
The complete debt settlement service provider is pioneer of the National Debt Relief Stimulus Plan and is affiliated with Libre de Deudas. Their in-house debt negotiation specialists help people in financial hardships negotiate settlements of personal, medical, and business debts.
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