Debt Management Opinions

There are many opinions about debt. Some people believe all debt is bad while others conclude it can be a form of investment. Some people think you should try to avoid consolidation while others believe it creates peace of mind. Many people feel that defaulting on debt is always irresponsible, while others conclude that sometimes it's the only responsible option. There are almost as many opinions about debt management as debtors.

Debt is Bad

Many people believe that all debt is bad. It leaves you paying more for things than the original sticker price and if you get in over your head, it can drive you to lose things you've paid a lot of money for, like a house or a car. Other people argue that some debt is good. Debt for a college loan, for example, or a house that increases in value is considered a worthwhile investment to building greater wealth. The same MSN article, however, that concludes that some debt is good also argues that debt for disposable items is generally bad.

Snowball vs. Avalanche

If you're planning to pay off your debt yourself, some people recommend the snowball, others the avalanche. Write all your debts down, with amounts and interest rates. With the snowball plan, you pay off the smallest debts first and roll the amount that had been dedicated to the paid-off debt into the next debt for a snowball effect. Some people believe this is the best way to stay motivated. Other people suggest it's wiser to pay off the debts with the biggest interest rate first -- the avalanche -- and dedicate the saved interest to paying off other debts. Both debt plans are recommended as good options by MSN Money.

Debt Consolidation

Many experts, including those on MSN Money, say debt consolidation can be a slippery slope. If you unload your credit card into a new card or an installment loan, you may be tempted to rack up the first card again. Also some debt consolidation companies charge high fees and aren't consistent about making payments to your creditors. MSN Money recommends that if you must consolidate, consolidate to a bank installment loan or through a debt management plan offered by a low-fee credit counseling agency like those listed with the Association of Independent Consumer Credit Counseling Agencies or the National Federation for Credit Counselors.

Paying Your Bills is Not Always Best

Debt settlement, bankruptcy, and foreclosure all promise to wreck your credit for at least seven years. But there are times when your debt seems overwhelming and there's no other way out. Liz Pulliam Weston of MSN Money says debt settlement --in which you hire a debt settlement agency to settle your debts -- is faster than bankruptcy. But bankruptcy is cheaper than debt settlement because of high fees charged by agencies. Also, with Chapter 7 bankruptcy, debts are erased. Not so with debt settlement. There's still a stigma attached to walking away from debt, like bankruptcy and foreclosure, but sometimes it's the smartest thing to do.