Debt Management Program

The latest recession has taught many people some hard truths about credit and finance. With those hard truths came tough realities, such as dealing with financial burden. When the burden becomes too big to handle, there are some steps you can take to regain your footing and take the financial bull by its horns. One of the steps you can take is debt consolidation, which simplifies your finances and therefore makes it easier to manage.

Debt consolidation is the process of combining multiple bills and loans into one bulk payment per month. There are generally four options and methods for consolidating debt: refinance of debt, personal loan debt consolidation, debt settlement, and consolidation through a debt management program.

Refinance of Debt

Sometimes referred to as debt restructuring, refinance of debt is the process of changing the terms and conditions of a debt obligation. Usually, the goal of debt through refinance is to take advantage of better interest rates, reduce monthly payment sums, and reduce risk.

In these economic times refinance of debt is the most difficult debt consolidation option unless you have good credit, which is doubtful if debt consolidation is a reality. Refinance of debt usually consolidates credit card debt into a mortgage payment to take advantage of the mortgage’s interest rate.

Personal Loan Debt Management

This option is risky and hard to achieve. Personal loans are normally done in small amounts and are prone to fluctuating interest rates over short periods of time. Because these types of loans are risky, lenders tend be very cautious and the interest rates tend to be high. When considering that, it is often a better idea to pursue other options over debt consolidation unless this is the only choice you have.

Debt Settlement

This option can reduce monthly payments, reduce the amount of debt you actually owe, significantly lower interest rates or even relinquish them altogether and reduce the amount of time that you are in debt. This can sound like a dream if debt is making you feel like drowning.

However, debt settlement has the highest failure rate out of all the options due to a number of reasons. Creditors will often harass the consumer and threaten them with lawsuits. Invariably, credit ratings will drop during the debt settlement process and will take a while to improve. This option is a high-risk/ high-reward option, and is in fact a very viable option for people considering bankruptcy.

Debt management programs go beyond mere financial counseling and loans and take a more holistic approach to debt consolidation. These debt management programs will greatly reduce interest rates and monthly payment amounts, consolidate all of the debt into one monthly sum (which makes debt easier to manage,) will usually halt harassment from debt collectors and will help keep your credit rating in respectable standing considering the circumstances.

In many instances, debt management programs substantially lessen or even get rid of the debt within five years. When considering all that information, enrolling in a reputable debt management plan is usually the best, easiest and fairest debt consolidation option.

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This article was written by Karl Stockton on behalf of Arias Ozzello & Gignac LLP. Contact them in future for your legal needs.

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