If you are one of the many residents in New Mexico who are facing serious financial issues, you may be eagerly exploring the options for effective debt relief. New Mexico is a naturally beautiful state in the southwestern U.S., and it has a strong economy with great job opportunities, educational prospects and more for residents to benefit from. However, personal debt balances are high in New Mexico, and some residents are so heavily in debt that they cannot afford to make their minimum payments each month. While there are several debt relief options to consider, debt settlement may be the right option for your specific circumstances. A closer look at this option will reveal if it is well-suited for your financial situation.

The Typical Budget for a New Mexico Resident

Home to more than two million residents, New Mexico is home to many wealthy or financially comfortable individuals. These are often individuals who live below their means and who carry little or no credit card debt. While some residents in New Mexico live a comfortable life without the burdensome concern of debts they cannot pay back, the average resident has a tight budget and at least a little bit of credit card debt. The U.S. Census Bureau states that the average per capita income in this state is $24,012 per year. Furthermore, more than one in five area residents is in poverty. Even those with an average or higher than average income level in New Mexico may struggle with a tight budget, and one reason for this is the high cost of area housing. New Mexico homeowners pay approximately $1,227 per month as a mortgage payment. The state’s renters pay $777 per month for housing. If you have high debt payments coupled with high standard living expenses, it is understandable why some individuals are currently unable to make debt payments in full each month. Debt settlement may provide you with the relief you seek from a troublesome financial situation.

A Closer Look at Debt Settlement

If you are ready to move forward with your plans to seek debt relief, you may be wondering what debt settlement is. This is a process where you or a professional debt negotiator will actively communicate with your creditors, requesting that they reduce the amount that you owe to them. Creditors are not required to accept a settlement offer, and they may keep the amount that you owe at its current amount. However, if you are successful with negotiations, you may benefit from having several hundred dollars or more of your outstanding balance washed away. If you can accomplish this, you will notice that your minimum monthly payments on revolving debts decreases. Altogether, this is an effective way to gain control over your finances if you are successful in the negotiation step.

Who Benefits From Debt Settlement?

As wonderful as settlement sounds it is not without its drawbacks, and some of these drawbacks may make it a disadvantageous option for you to pursue. When you agree to settle your debts, you are agreeing to pay your creditors less than you actually owe. This is bad for your credit rating, and you will notice that your scores are lower as a result of this action for several years or more. If you are thinking about moving forward with debt settlement and still have a good credit rating despite struggles with debt, you may review debt consolidation as a first step. This is because consolidating debts can provide relief and will not damage your credit rating as settlement will. Most people who move forward with settlement are those who are no longer able to make minimum monthly payments on their accounts.

Typical Debts That Can Be Settled

Another reason why debt settlement may not be ideal for you relates to the types of debts that you currently have. Only specific types of debts can be settled, and because of this, settlement may not provide you with the significant amount of debt relief that you need. Settlement is used with unsecured debts issued by private banks and lenders. Credit cards are the most common type of debt that can be settled, and some student loans issued by private banks may qualify as well. Home mortgages, car loans, government-backed student loans and others are not acceptable.

While many individuals carry personal debt in New Mexico, not everyone has a serious enough problem with debt to warrant debt settlement. If you do not think settlement is needed and you still want debt relief, consolidation may be the answer. On the other hand, if you need more significant relief, you may need to file for bankruptcy. It is wise to seek financial advice from a skilled credit counselor before you move forward with any debt relief strategies.