While looking for a debt reduction program, it is also important to ensure that the plan chosen is not an ineffective one.  One example is requesting for a loan from friends and family members who have the financial capability to help you repay all of or part of your loans.  This may seem to be a good solution because there is no interest to be paid unless you or they insist on it.  You can take your time in repaying the loan because you cannot default on the loan and there are no due dates to follow.  However, the fact that there would be no pressure to return the money at a certain time may cause you be lax and it may take too long for you to repay the debt, thereby possibly damaging your relationship with them.

Another example of debt reduction programs that do not work is the plan to pay the minimum amount required for your credit card.  It may seem that you are getting ahead in paying off the debt but in reality it will take a very long time before the debt will ever be repaid.  The reason is that the amount that is left unpaid will grow because of the interest that is added to it every month.

Another type of debt reduction program that could get you nowhere is hiring consumer credit counselors that have high fees.  Legitimate credit counselors can provide the much needed assistance in your plan to get out of the debt trap.  However, there are companies and individuals who take advantage of the stress that people are in by offering to help while asking for large amounts of upfront fees. 

Another one of the debt relief solutions that are not practicable is consolidating the different debts into a single loan that has a high interest rate.  The excitement of finding a loan that would accommodate all of the other loans and thus you have only one loan to think about may keep you from checking whether the interest rate is low or not.  It is advisable to check the fine print that is often found in the contract or else you may just be exchanging your debts with a loan that has a higher interest rate and will therefore make it even harder for you to escape the debt trap. 

Finally, bankruptcy could be one of the feasible debt reduction programs but it is highly recommended that it should be the last option.  It can work for debt reduction elimination for most of your debt but it will affect your credit score for several years.

Tags: consumer credit counselors, debt reduction elimination, debt reduction program

This entry was posted on Friday, February 12th, 2010 at 1:49 pm and is filed under Debt Relief. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.