THE PROS AND CONS OF

CREDIT CARD DEBT RELIEF OPTIONS

DEBT MANAGEMENT PROGRAM

Credit counselor negotiates rates on your behalf

1

Also consolidates medical bills and payday loans

2

May improve credit score

3

Can still apply for secured credit, like a car loan

4

Get help balancing your budget

5

All accounts included in the program are frozen

1

Can't apply for unsecured credit while enrolled

2

Not as effective for charged-off debts/collections

3

If you leave the program, your original rates and penalties may be restored

4

DEBT SETTLEMENT PROGRAM

You get out of debt for less than you owe

1

Highly effective for charge-offs and collections

2

Avoid bankruptcy to protect your assets

3

You don't pay until at least one debt is successfully settled

4

Each debt settled creates a 7-year credit penalty

1

Fees can be high for each debt settled

2

Stopping bill payments can damage your score

3

There are lots of settlement scams that take your money and run

4

DIY WORKOUT ARRANGEMENT

You negotiate individually with each creditor

1

Some creditors may be willing to eliminate interest charges entirely

2

Since the creditor agrees to adjust the payment schedule, this won't damage your credit score

3

The creditor may require that you close your account

1

Results can vary widely, based on your credit score and relationship with each creditor

2

If you don't keep up with the repayment plan, you may face additional penalties

3

DIY SETTLEMENT OFFERS

You negotiate individually with each creditor/collector

1

You may be able to negotiate re-aging or pay-for-delete to remove credit penalties

2

This avoids the fees of a debt settlement program

3

Settlement companies can often help you settle for a lower percentage of what you owe

1

Each settlement creates a 7-year credit report penalty

2

Results can vary widely and depend on your ability to negotiate

3

If you have accounts that are current, you can keep them that way

4

DEBT CONSOLIDATION LOANS

Your credit card accounts stay open and usable

1

Loans offer much lower rates and fixed payments that are easier to manage

2

There's no credit damage and your score may improve

3

If you start charging again before you pay off the loan, you'll just make your debt problems worse

1

This only works if you have good credit and for debt amounts of $35,000 or less

2

Some lenders may require you to close your credit cards

3

You can use the funds to pay off other types of debt

4

BALANCE TRANSFERS

You have 6-18 months to pay off your debt interest-free

1

There's no credit damage and your score may improve because you have a higher available credit limit

2

Transfer fees can be high

1

Usually only works for debt amounts of $5,000 or less

2

You need a lot of cash to pay off the balance before the 0% teaser rate ends

3

All of your existing accounts remain open and usable

3

You can make your debt problems worse if you start charging on your other cards

4

Requires at least good credit

5