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Being in debt can be overwhelming. Fortunately, there are several different debt relief options for people
who want to eliminate their debt. Here are a few options to consider.

Paying the Monthly Balance

One way to get rid of certain kinds of debt is to pay down the monthly balance. Some people can do this
with every credit card they own that they have a balance on. Others might need to pick one specific credit
card to focus on at first.

This works because it requires people to be aware of how much debt they owe. That alone can influence
people to make better decisions about their spending habits. It also helps avoid interest rate charges.

Debt Management Plans

Nerdwallet https://www.nerdwallet.com/blog/finance/find-debt-relief/ states that a debt management plan
allows a person to pay their unsecured debts in full, but often at a reduced rate of with fees waived. Typically, debt management plans focus on credit cards.

The person makes a single payment each month to a credit counseling agency. That agency distributes
that money among the person\’s creditors. The person\’s credit cards will be closed until the person
completes the debt management plan.

Nerdwallet points out that it is important to pick an agency that is accredited by the National Foundation
for Credit Counseling or the Financial Counseling Association of America.

Bankruptcy

The Federal Trade Commission https://www.consumer.ftc.gov/articles/0150-coping-debt states that
personal bankruptcy may be an option. However, the consequences of filing for bankruptcy can be long-lasting. Bankruptcy information can stay on a credit report for 10 years and make it difficult to get credit, buy a home, get life insurance, and sometimes get a job.

There are two types of bankruptcy: Chapter 13 and Chapter 7. Each one must be filed in federal bankruptcy court. Filing fees are several hundred dollars.

Chapter 13 allows people with steady income to keep property, such as a mortgaged house or car, that they might otherwise lose in the bankruptcy process. Chapter 7 involves liquidating all assets that are not exempt (such as automobiles, work-related tools, and basic household furnishings).

Bankruptcy is not a quick and easy way to achieve debt relief. It is time consuming, could involve extra expenses, and may or may not work out as the debtor hoped it would.

There are plenty of reasons why it is important to have a good credit score. One reason that you may not be aware of has to do with insurance. Some insurance companies use a person\’s credit score to help them determine the amount they will charge for your premium.

The Federal Trade Commission (FTC) https://www.consumer.ftc.gov/articles/0152-credit-scores points out that some insurance companies use credit report information, along with other factors, to help predict how likely it is that you will make an insurance claim. Your credit score is among the factors that influence whether or not they will sell you an insurance policy and how much the premiums will cost.

Insurance companies might use the phrase “insurance scores” or “credit-based insurance scores” when they look at a potential customer\’s credit score. They are are trying to figure out if a specific customer is likely to pay their premium. Potential customers who have good credit scores show the insurance company that they have a history of reliably paying their debts.

The Equal Credit Opportunity Act https://www.consumer.ftc.gov/articles/0347-your-equal-credit-opportunity-rights (ECOA) requires that a creditor\’s scoring system (or an insurer\’s scoring system) can not use certain characteristics – such as race, sex, marital status, national origin, or religion, as factors. If an insurance company denies you, they ECOA requires them to give you notices with the specific reasons your application was rejected. They must give you that information within 60 days.

An acceptable reason for rejection your application for insurance could be: “Your work history is too short.” An unacceptable reason would be: “You didn\’t receive enough points on our credit scoring system.”

The FTC says that sometimes a person can be denied insurance, or offered less favorable terms, because of the information in their credit report. In that case, the Fair Credit Reporting Act (FCRA) requires the insurance company to give you a notice that includes the name, address, and phone number of the credit reporting company that supplied the information. If you receive this kind of notice, you are entitled to a free copy of your credit report.

It would be a good idea to check your credit score before you apply for insurance. The FTC says that you can order your free annual credit report from one or all of the national credit reporting companies by visiting www.annualcreditreport.com. Find out how good, or bad, your credit score is. If it isn\’t very good, you might be able to do some things to improve it.

Restaurants, departments stores, banks, and many other types of businesses have experienced what is often called a “data breach”. When this happens, customers who might be affected by the data breach typically get an email letting them know that their information may have been stolen. The letters might suggest that the customer make use of a credit monitoring service. But, do you really need one?

Investopedia https://www.investopedia.com/terms/c/credit-monitoring-service.asp defines a “credit monitoring service” as “a system that monitors a consumer\’s credit reports for signs of possible fraud.”

A credit monitoring service notifies consumers when new information shows up on one or more of their accounts. That new information could be a new account, a credit inquiry, or something else. This makes it easy for the consumer to keep an eye on changes and to take action if a change not a legitimate one.

You might need a credit monitoring service if you are unable, or unwilling, to monitor your credit report yourself. It is possible to obtain a free credit report and check it over on your own. It is a good way to find out your credit score, and to see everything is on your credit report.

Credit monitoring services are not free. Some people will not want to pay for a service that they can do themselves.

Are you considering applying for a loan or a mortgage in the next year? You might want to make use of a credit monitoring service.

The bank you are seeking to get a loan or mortgage from is likely to check your credit score. If your score is too low, the bank might not want to loan money to you. Or, the bank might require you to pay a high interest rate. If you have no idea what your credit score is, you could be in for an unpleasant surprise.

There are limitations https://www.nerdwallet.com/blog/finance/credit-monitoring-identity-theft-monitoring/ to what a credit monitoring service can do for you. It cannot prevent identity theft or credit card fraud. That being said, if you have already had your identity or credit card information stolen, a credit monitoring service can help you figure out if something done by the thief has ended up on your credit report.

Credit monitoring reports cannot stop a thief from applying for a credit card in your name. It cannot stop nefarious people from sending you phishing emails. A credit monitoring service is not able to correct errors that are on your credit report.

Debt consolidation is a potential option for those who are struggling to reduce their debt. It is important to understand what debt consolidation is, how it works, and why it might not work for you.

What is debt consolidation?

According to Investopedia, Debt consolidation https://www.investopedia.com/terms/d/debtconsolidation.asp means taking out a new loan to pay off a number of liabilities and consumer debts, generally unsecured ones.

In general, this means combining the debt that is on several credit cards by taking out a new loan. Ideally, the new loan will have a lower interest rate and lower monthly payments than the amount the person was previously paying across all of their credit cards. Debt consolidation can also be used to deal with student loan debt, medical debt, and other types of debt.

How does debt consolidation work?

Ideally, debt consolidation includes debt counseling. The company offering the debt consolidation service sits down with the person who wants a loan and works out a plan to eliminate their debt in three to five years.

Debt consolidation starts when a person takes out a debt consolidation loan. The person\’s debt (from credit cards, medical bills, and other unsecured debt.) get rolled into that loan.

The person makes a single payment – on that new loan – every month instead of multiple payments, on different loans, on different days, with different interest rates, every month. The loan provider takes that one monthly payment and distributes it to the person\’s various creditors.

Debt consolidation is a service that helps a person manage their debt. It does not erase their debt. The person must continue paying down their debt.

Why debt consolidation might not work for you

Debt consolidation is for unsecured debt. It is not for secured debt (such as mortgages and car loans). There are different debt relief options available for secured debt.

Debt consolidation comes with fees. There can be a setup fee, and there will be monthly fees. People should consider whether or not they can afford to pay that monthly fee on top of the amount they must give to the debt consolidation company each month.

The debt consolidation interest rate might not result in a lower interest rate. This means a person could get stuck paying more than they would have if they did not consolidate their debt. There is no guarantee that a loan that started with a low interest rate will stay that way for ever. It could go up.