Debt Relief Information

With the state of today's economy, consumer debt is mounting. If you’re looking for debt relief, you’re not alone. Hundreds of thousands of people seek some sort of relief every year. For most people, it’s a simple debt consolidation or refinance loan designed to reduce interest or monthly payments. Other people need more serious kinds of help, in which case credit counseling, a debt management program, or debt settlement might be appropriate.

What is debt consolidation?

Debt consolidation is a solution to stopping your debt from spiraling out of control. Debt consolidation doesn’t reduce your debt; it merely eliminates multiple high interest rates associated with debt from various lenders. A debt consolidation loan is one viable solution to consolidating your debt. In this situation, you basically get a loan to pay off all your various debt or get a better type of loan (changing from an ARM to a Fixed rate loan).

Debt Consolidation Terms

Before I start my blog on Debt Consolidation, let me explain some basic terms that you will need to know. 

Bankruptcy: a type of aggressive consumer debt resolution where you attempt to either liquidate your debts through a chapter 7 bankruptcy, or re-organize your debts into a payment plan through a chapter 13 bankruptcy. 

Collection Agency: a company hired by a creditor to collect a debt that it is owed. If you are seeking bankruptcy advice, it is wise to seek advice from a local bankruptcy attorney.

Credit Counseling: a third party managed payoff strategy where your interest rates are lowered to the bank's concession rate and thereby your monthly payments decline. Typically, a credit counseling program runs around five years to getting debt free, but each consumer's experience depends on their own creditors and the size of their payments.

Credit Score: a measure of credit worthiness. Typically, it is a guage of a consumer's likelihood to default on a future credit line. FICO is the industry standard measure of a credit score, which is primarily based on payment history, debt utlization, and the amount of debt owed.

Debt Consolidation: taking multiple debt or credit lines and consolidating them into one new payoff plan. Frequently, this is a consolidation loan, provided to consolidate debts into one loan with one payment, typically shifting credit card debts to secured debt by refinancing a mortgage. It could also refer to a credit counseling or debt settlement program.

Debt Management: a service provided by an agency that provides debt help services, including credit counseling, debt settlment, and debt consolidation loans. Most people refer to a Debt Management Plan as a plan administered by a credit counseling firm.

Debt Settlement: a program for negotiating and settling consumer debt to a discount to face value. Frequently, resulting in lower payments, lower debts, and a short period to debt freedom while avoiding bankruptcy.