Consumer Rated Debt Relief

It seems debt has become a part of everyday life, whether through credit cards or home and car loans. Many times, people can become overextended and fall behind on their payments. Soon, creditors are calling, and your house is near foreclosure. You do have options to consolidate debt or negotiate lower interest rates.

Secured Debt

Your house and car are considered secured loans because they have a graduated payment schedule in a contract and involve some kind of collateral. If you find yourself getting behind on payments for a loan, your best recourse is to first contact the lending institution to try and negotiate a different payment schedule for extending the loan period. This method of debt relief will not knock your credit rating.

If you have multiple loans, you can try to get a consolidation loan. This allows you to combine all your loans, credit card debt, etc., into a single payment, which hopefully is smaller than your combined payments. The goal is to have one easy payment rather than several payments and usually involves mortgaging your house, but there are a few pitfalls. You may get caught paying closing costs again on your home and if the value of your home drops, you could end up paying more than it is worth.

Unsecured Debt

Credit card debt, medical bills and debts that have gone to collection agencies fall under unsecured debt. To reduce this debt, you can once again try to negotiate a payment plan with each creditor or use a credit counseling service. These services will work with your creditors and try to negotiate a lower interest rate and payment schedule. You also will have only one payment instead of several.

Not all credit counseling services are created equal. Before choosing a service, research the company and see if there are any complaints with the Better Business Bureau.

Dealing with credit card companies and debt consolidation services can affect your credit rating. If either the credit card company or the counseling service chooses to have the debt charged off, it will reduce your credit score. A charge-off is when credit card companies accept amounts less than what is originally owed. They usually keep the spent amount and significantly decrease the amount of interest owed.

Bankruptcy

The one debt solution that will encompass both secured and unsecured debt, other than a debt consolidation loan, is bankruptcy. This should be a last resort as it will devastate your credit rating.

Several types of bankruptcy are available, but individuals usually choose Chapter 11 or 13. Bankruptcy will either restructure or eliminate your debt, allowing you to start fresh. Not all loans, such as student loans, can be eliminated using bankruptcy, so you should talk with a bankruptcy attorney to see if this is the best choice for you.