FAQS

I want to lower my debt. How do I do it?

There are a number of ways you can lower your debt. Relief takes a number of forms, but they all work a bit differently. You can establish a household budget to cut down costs, consolidate debt, or even refinance to pay it off. However, you first need to figure out what you want. Do you want to: a) save the most money, b) get the lowest payment, c) protect your credit rating, or d) be debt free fast? The answer will determine which debt relief option to select.

What are my debt relief options?

The most common options are: debt consolidation, debt management, and settlement. You may also want to consider home refinance or a home equity loan.

How will debt consolidation affect my credit?

Debt consolidation has a minimal effect on your credit. In most cases, you apply for a home refinance or debt consolidation loan and use the proceeds to pay your other debts. Although you will now have a single larger debt on your credit report, several small debts will be eliminated.

How will debt settlement affect my credit?

Debt settlement will have a larger effect on your credit. When a debt is settled for less than its full value, the creditor will note that on your credit report. The damage is much less than you'd experience with bankruptcy or default, and in most cases your credit will improve within a couple of years.

I've heard of debt relief programs. Are they legitimate?

Indeed! Debt relief programs are legitimate. Many people have found relief through such programs. However, not all companies are as legit as others. When you're searching for a relief program, look out for the following signs of shady debt relief and consolidation companies.

GLOSSARY TERMS

Credit Counseling: a program for reducing monthly payments, where a consumer is placed on a "Debt Management Plan" to repay their bills, frequently at a reduced interest rate.

Credit Score: a determination of the ability for a consumer to make payments on future loans, determined by analyzing their past and current performance, including payment history, debt level, debt utilization and other factors.

Collection Agency: a company hired by a creditor to collect a debt that it is owed.

Debt Consolidation: a loan, provided to consolidate debts into one loan with one payment, typically shifting credit card debts to secured debt by refinancing a mortgage.

Debt to Income Ratio: a determinant of financial well-being arrived at by dividing monthly debt payments by income.

Debt Management: a service provided by an agency that provides debt help services, including credit counseling, debt settlement, and debt consolidation loans.

Debt Settlement: a program for reducing consumer debt to the lowest level, typically with a low monthly payment, while avoiding bankruptcy.

Fair Isaac and Company: Fair Isaac is the company responsible for creating the FICO score. This three digit score is created using information from your credit report and ranges from 300-850. The major credit bureaus use this score in evaluating your credit.

Gross Salary: total amount of money earned before taxes and other deductions are subtracted.

For more information and resources on debt relief, visit http://www.bills.com/debt_relief/