How Can Unsecured Debt Consolidation Help You?

By Jon Arnold

If you have a lot of debt, one thing you might consider is debt consolidation. There are two different basic types of debt consolidation - that for unsecured debt and secured debt. Unsecured debt consolidation is what we'll be talking about.

What is unsecured debt? Unsecured debt is any debt that doesn't have collateral attached to it. As an example, most credit card debt is unsecured. That means that when you acquired the credit card, you didn't put up collateral in exchange for having a lender give you that credit card. In other words, if you don't pay off the balance on a credit card, the lender or credit card company cannot seize your possessions in lieu of being paid the balance owed. Instead, what happens is that that particular account gets turned over to a collection agency.

By contrast, secured debt is something that has collateral attached to it. That means that if you don't pay this particular debt, the collateral can be seized. For example, a mortgage is usually backed by your house itself as the collateral. If you don't pay your mortgage, the mortgage lender can seize your house.

Benefits and drawbacks of unsecured debt consolidation

When you engage in unsecured debt consolidation, you are taking several smaller sums and consolidating them into one large loan. Usually, what happens is that you take your credit card balances, for example, and pay them off with a consolidation loan in one lump sum. Then, you become responsible for that consolidation loan instead of the individual balances on your credit cards or other unsecured loans.

In some cases, when you take out an unsecured debt consolidation loan, you do so with a debt consolidation company. Oftentimes, the company that consolidates the debt buys the debt, often at a discount. You can shop around for companies that will cut you in on the savings they get. This can help you save money in the long run.

However, be careful. Because unsecured debt is something that the lender can't come after you for (other words, you're not going to lose your house or other important possessions because you can't pay this debt), you and your house and other important possessions are relatively safe even if you find yourself in a situation where you can't pay the debt off. However, if you take out an unsecured debt consolidation loan, that loan is likely to be considered secure, so that you'll have to provide some collateral for it. You also have to then be at risk of losing whatever you put up as collateral if you can't pay that loan off.

In short, is unsecured debt consolidation a good idea? It is ONLY a good idea if you are in a position whereby you know you're going to be able to pay that debt back. If you're not, stay away and simply pay back your credit cards yourself slowly, over time and as you're able, while taking care of your most basic needs such as rent, food, etc., first. But this IS a much better option than bankruptcy for many reasons, not the least of which is the long term negative effects of bankruptcy on you.

In a Financial Crisis? Have You Considered Debt Settlement?

By Christina Costa

Do you suddenly feel as though you are drowning in debt? There is relief available and that is debt settlement! This will have a slight impact on your credit rating, but in comparison to bankruptcy this is a much safer option.

The way debt settlement works, is that you are negotiating with your creditors to reduce the amount you owe them. Say you owe around $9,000 to one credit card company, they might be willing to take a payment of $6,500 in full.

On average, most creditors will be willing to settle between 25-75% of your total balance. They usually will take part of your payment, in hopes that you do not file bankruptcy, since that would leave them with nothing.

A reputable debt settlement company will work on your behalf and negotiate with your creditors. They are the middle man and will go back and forth between you and your creditors. You will have to pay them a fee, but in the end that payment is worth it when they get your overall debt negotiated down.

As soon as they have reached an agreement, the creditors will consider your debt as "paid in full." They will then report to the credit bureaus that you have completed all of your payment obligations. If you had any delinquent debt already on your credit report, before you started the debt settlement process that will stay with you.

There is a difference between a debt settlement and debt consolidation company. If you want to consolidate then you will get a loan or low interest rate credit card to pay off all of your debts. Debt consolidation is when you combine all of your debts into one and make only one payment a month.

If a debt settlement company is the best choice for you, make sure that you go with one that is reputable. This is your financial future you are placing in someone else's hands. There are many legitimate debt settlement companies, but there are also companies who are looking to just make money off of you.

Make sure you check with the BBB (Better Business Bureau) for any complaints against the company. It also is a good idea to get referrals from any friends of family.

Credit companies do not make it public knowledge that they are willing to settle debts. They are not going to make the process easy on you, because they do not want to lose any money. The do not see debt settlement as a means to an end of a bad credit situation. Because of this, most creditors do not directly want to work with consumers to settle their debt until they are past due.

When you are three to six months behind on paying your debts, this is usually the best time to try and settle your debts. The creditors know that you are having trouble making payments, and like I said earlier they might be fearful that bankruptcy is your next step. If you file for bankruptcy they get nothing.

So as a last ditch effort to get some form of a payment they usually will be willing to settle your debt for a lower amount than what you owe.

Admitting that you might actually be in some sort of financial trouble is the first step. No one really wants to believe that they are so far in debt that they might need to seek professional help. Yet, if you are struggling from month to month trying to meet your obligations, it is time to get focused and back on your feet.

Bankruptcy should be kept in the back of your mind as the absolute last possible way to dig your way out of the hole you have fallen into with debt. Take a chance with debt settlement and find a reputable company who can help you get your bad credit in order and finally live a life without any worry towards your finances!

Debtors Stuck With Credit Problems - Seek Debt Consolidation

By E.S. Cromwell

When you're dealing with financial obstacles there is one fact that stands to be universally true - you need to overcome them. Yet, working your way beyond these said obstacles isn't merely a process of just going through some motions. It's not simply a matter of crunching some numbers and doing some transferring of balances. In fact, the ways in which you approach and maneuver your way around and over these obstacles must be carefully calculated. This is both true in the sense of dealing with actual numbers as well as planning the methods of tackling your financial issues.

And currently, debt is without a doubt a major dilemma for more than a few Americans. This is currently so thanks to all the repetitive actions of overspending and giving into shopping temptations, especially when driven by credit cards.

Minimal Plastic Budgeting Creates Big Debt Balances

After a good amount of shopping what builds up is countless amounts of credit card debt. Totals can range anywhere from hundreds to thousands. The results are, of course, varied from credit user to credit user, but undeniably big debt balances always follow. And this is where the problem of paying off debt comes into play - it is, on the face of it, a big task to deal with.

And big tasks come from big mistakes. Where all these debt totals come and accrue from is directly in relation to the appeal of having a credit limit, particularly one that has some leeway to it (based on the individual creditor at hand). This mentioned, most credit card companies are more than happy to extend thousands in credit availability to their consumers. And, for those credit users who lack controlling their purchasing impulses, it's more than easy to fall into a downward routine, especially where building big debt balances and paying them down through minimum payments occurs.

Changing Credit Payoff Methods to Get Out of Debt

You need to realize that paying off debt through just minimum payments is not helpful to anyones financial situation. In actuality, paying through just minimum payments is hurtful and could lead to ruin for cardholders when considering the interest hits they'll take. As it is, minimums don't take away from the principal of a balance. And with interest rates on cards being at 10 percent or higher (in most cases) you could easily wind up paying more sums of money than expected over the lifetime of your balance. Also, consider that having high balances is detrimental to your credit score.

So, where does all this information leave you? Hopefully, it puts you in a place of acknowledgment that what you need is to get out of debt and do it quickly.

Getting Out of Debt Quickly and Cleverly

You need to relieve yourself of your credit card debt. And obviously, you no longer want to have double-digit interest to worsen your balances further. One of the best ways to do this is by ceasing all activity on your credit cards. More or less, stop spending via your plastic conveniences. Stop making further credit card purchases. Do this before it's too late. As it is, you need to pay off what you've accrued. To do this, especially if you're under a newly formed budget, it would be best to confide in a debt consolidation loan. This will combine all your outstanding debt totals, including various credit card debts, to be paid off in a reasonable, monthly based format.