Debt Consolidation Settlement

Debt consolidation settlement, also known as debt settlement, debt reduction, and debt negotiation, involves negotiating with creditors to lower the amount that one owes. In some cases, a consumer that enrolls in a debt consolidation settlement program is able to lower the amount that they owe by up to 50 percent, lower their monthly payments considerably, and be debt free in as little as 12 to 36 months. For consumers with high credit card debt, it means that they can eliminate debt and save money not only off their balances, but also indirectly on interest charges all without using their home as collateral (assuming they own a home). Moreover, qualifying for debt settlement consolidation is based mostly on who you owe and what state you live in, it has nothing to do with your credit history and you do not need a home to get approved.

Many consumers who are seeking debt settlement consolidation are also considering consolidating their debts through a home equity loan. Like most things there are downsides to getting a home equity loan or refinancing your mortgage that must be considered before choosing a solution that's appropriate to your individual situation.

1. Bear in mind the possibility of foreclosure. If it's even a question whether you'll be able to afford the monthly payment on your debt consolidation loan, then avoid it at all costs. By securing the loan with your property, you could be risking your home when wide array of options are already available to you. On a related note, if your basis for being able to afford the monthly payment rests on things like, "Once I close that big deal at work next month" or "I should get my promotion by then", then you should definitely reconsider. When it comes to debt, remember Murphy's Law: "Anything that can go wrong, will go wrong." In a debt settlement consolidation, your home is not at all affected.

2. With a debt consolidation loan you're impacting your ability to discharge the debt in a bankruptcy. That is, if something comes up down the road and your income is suddenly reduced, filing bankruptcy won't even help since you converted all your unsecured debt into secured debt. Moreover, other alternatives like debt settlement and credit counseling will not be available to you. On the other hand, if you had just kept the debt on your credit cards and your income was suddenly reduced, you'd still have bankruptcy, debt settlement, and credit counseling as possible alternatives for eliminating the debt and thus been able to protect your home. This situation would matter if you could afford the payment on your first mortgage, but you had a home equity loan payment that pushed you over the edge. More specifically, this applies to consumers from states li

3. Many consumers that get debt consolidation loans find that several years later they end up in the same situation----buried in high interest credit card debt and only able to afford the minimum payments. The problem lies in the fact that debt consolidation does not address the root of the problem, and therefore, consumers continue to overspend and charge things to their credit cards instead of living on a cash basis. In a lot of cases, debt settlement consolidation helps a consumer to learn to live within their means by forcing them to close all their credit card accounts. If your problems lie mostly from overspending and poor budgeting, then a lot of times a debt consolidation settlement program is a more appropriate option.

If you would like to learn more, please contact one of our consultants.