What is Debt consolidation?:
Debt consolidation involves repaying the debt amount in a more organized, planned and systematic manner. There are many options available under debt consolidation programs.
Let us see the alternatives to bankruptcy, which is widely availed by people and which gives ample scope to regain ones financial stature at the earliest.
The following options are available for solving ones debt problems.
Debt settlement:
A borrower is permitted to pay less than the actual amount. This settlement may be up to 40% to 60% of the total outstanding amount. The money can be paid on a monthly basis. One may take the help of a debt consolidation firm.
Self repayment:
By doing some amount of introspection, it is easy to recognize the areas where expenses can be cut. Working out a budget and following it is important.
Debt consolidation programs:
It helps a person in debt to roll up all his debt accounts in to one and finally pay off to one creditor in one go. It also allows a debtor to pay much less than the amount he was supposed to actually pay. Debt consolidation firms help in going about the entire process.
Debt consolidation loans:
A kind of personal loan in, which the person in debt can pay off all his debts in a single payment.
Debt consolidation, equity loans, credit counseling, debt management plans, even Chapter 13 bankruptcy – it doesn’t matter which of these debt programs you’re talking about. They all suffer from one fatal flaw, the number one problem that causes most people to fail at eliminating their debts through these techniques. Can you guess the problem?
It’s probably not what you’re thinking. It’s not the fees, interest rates, or the quality of the companies behind these debt solutions. No, the number one problem with most debt programs is that they require FIXED monthly payments without exception. This major flaw is the main reason that very few people make it through a credit counseling program or a Chapter 13 bankruptcy plan.
People enter debt relief programs with the best of intentions. Take credit counseling, for example. You enter a program to get some help in bringing your credit card debts under control. The monthly payment of $500 sounds good. You’re humming along just fine for a few months, then wham! The water heater blows up. Time to shell out $800 for a new one. Unless you like cold showers, you’ll need to skip the $500 payment to the agency this month, and part of next month’s payment as well. Where does that leave you with the credit counseling program? Back on the street, that’s where. You simply CANNOT miss payments into that type of plan and expect anything but failure.