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Eliminating debt
Wednesday, 28 July 2010 03:00
Many consumers may have found themselves deeply in debt over the last few years, as the economy sunk into a serious recession. A large number of Americans lost their jobs or had their hours cut back at work, forcing them to pay for more necessities on credit cards. Others may have found themselves with unforeseen debt due to hardships such as divorce or medical emergencies.Whatever the reason, many people are looking for sensible ways of reducing and eventually eliminating debt. Fortunately for those struggling with unmanageable debt, there are a number of options available, each having their own benefits and drawbacks.
Many consumers initially explore consolidating their debt, whereby a bank issues an individual a new loan that pays off all their current debts and carries a considerably lower monthly payment than one would typically have with credit card lenders. This method may not eliminate debt instantly, but it can certainly help to lower monthly payments and rates, which allows consumers to pay off their total balance more quickly. It can also simplify the payment process by reducing several monthly payments into one. However, consolidation loans can be very challenging to qualify for since they often require that the borrower has superior credit, thereby making this option of eliminating debt much more difficult to attain.
Consumers that find themselves so deep in debt that they are falling behind on their payments may not think there is any hope of eliminating debt unless they file for bankruptcy protection. However, filing for bankruptcy can be an emotionally tolling process and is often considered the option of last resort. There are two kinds of bankruptcy that are available for consumers to file for: Chapter 7 and Chapter 13. Chapter 7 bankruptcy protection eliminates an individual’s debt completely, although it is difficult to qualify for and can require a consumer to divest some or all of their assets to pay off creditors. Chapter 13 bankruptcy requires an individual to pay back a percentage of their debts, typically over a 3 or 5 year repayment plan, and a trustee distributes those payments back to the individuals creditors. Both of these bankruptcy types can seriously impair an individual’s credit score and credit profile, and make it extremely challenging for an individual to secure any kind of favorable loan for years.
For those consumers that are struggling with debt but would like to avoid bankruptcy, there is a solution that offers a middle-ground to these alternatives and can be very effective. Debt settlement, also known as debt negotiation, is the process of negotiating with creditors to achieve a payoff amount that is a substantial reduction to the current balances that are owed. Creditors are very willing to negotiate on debt balances that are in arrears, because if a consumer were to file bankruptcy, they stand to get nothing. In order to succeed in such a program, consumers need to diligently save the funds that are required to make settlements, which typically run between 40 and 60 percent of the total current balances. Consumers can try to negotiate with their lenders on their own or they can hire the help of a professional company. There are pros and cons to both – but a good debt settlement company can achieve results for consumers that are more favorable than what they could otherwise arrange on their own.
When consumers look for the best way to eliminate their debt quickly, they should explore all of their options and make sure to do their due diligence on the companies offering the various solutions for eliminating debt. While no process is going to be easy, there are great companies offering successful solutions that are very worthwhile.
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About Debtmerica
Debtmerica is a leading debt settlement company that offers assistance to individuals and families who are experiencing financial difficulties and hardship.
We offer debt resolution programs that specialize in negotiated debt settlement that assists clients by reducing debt balances while providing an affordable monthly payment.
Our professional and knowledgeable staff has helped thousands of consumers get back on their feet financially.
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Debtmerica has had one vision since inception - to help Americans nationwide attain financial independence. At Debtmerica, we're proud of our achievements and honors. They represent our commitment to our vision and clients. |
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Top Articles to Help You Lead A Debt-Free Life
- Debt Consolidation: “Debt Consolidation” is one of the most commonly misunderstood and misinterpreted personal finance strategies that consumers inquire about all the time. While some view it as a method of taking on new loans, others see it as a debt relief alternative. It is more important than ever for inquisitive consumers to have a very strong understanding of exactly what debt consolidation entails, and the impacts it can have on personal finances.
- Debt Relief: Debt relief is defined as a partial or total forgiveness of debt. When the term is used by the government, it usually refers to the forgiveness of debt to underdeveloped countries. Recently, it has begun to refer to the millions of consumers who are overwhelmed with debt seeking financial relief from their unsecured debt.
- Credit Card Debt: Credit card debt is an example of unsecured consumer debt, accessed through credit cards. Debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she has spent.
- Debt Settlement: Debt settlement programs use a third party to negotiate lower balances and interest rates on unsecured debt. This type of debt management plan helps provide consumers an alternative to bankruptcy while reducing your outstanding debt.
- Credit Counseling: There are a numerous options for consumers who want to start getting their finances under control after accumulating large amounts of debt, which could inevitably lead to credit problems further down the road. Consumers who are in control of most aspects of their finances, but still feel like they could use additional help managing their debt burden, could certainly benefit from the assistance of a consumer credit counseling service.
- How Do I Get Out of Debt?: Now that the national economy is beginning to recover and people are having a better time dealing with their personal finances, many consumers who found themselves sunk deep in debt over the last few years may be asking themselves the question, “How do I get out of debt?” Fortunately, there are a number of avenues consumers can take to get out of debt, each with benefits and drawbacks depending on how quickly people need to fix their financial problems.
- 10 Tips to Avoid the Debt Trap: Have you ever thought about why so many of the people you know are struggling with debt? Do you ever wonder why banks keep lending to certain individuals, even when they are falling behind on their payments? Did you know that debt problems are a leading cause of major societal problems, such as stress, divorce and alcoholism?
- Credit Management: Many consumers are finding themselves buried under a pile of mounting debt. With interest accumulating month after month in addition to late fees being charged, many consumers are finding it difficult to make just the minimum payments on their credit cards. Although this may seem like an endless battle, with a strict budget and some discipline there are credit management strategies and solutions that will allow consumers to reduce or even eliminate their debt.
- Credit Card Debt Reduction: In recent months, many Americans have made a greater effort to seek credit card debt reduction and reduce the balances they owe, but some may not know where to start. Fortunately, there are several options available for consumers thathave a financial goal to achieve credit card debt reduction.
- Credit problems: Paying down high levels of debt is one of the best ways to improve credit problems and increase one’s credit standing. But many people cannot do that so quickly, especially in this economy. About one-third of a credit score is based off of a credit utilization ratio, which is the total creditbalances divided by the total credit limits. A great target is to use no more than 30% of one’s available credit.
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