Getting Out of Debt

Consumer workouts are an option for those experiencing a temporary financial setback, but require motivation, commitment, and a spending plan.

 

Debt consolidation loans give consumers the ability to pay off their high interest accounts typically through lowered monthly payments. However, the term of the loan agreement is longer. Home equity loans are the most common type of consolidation loans today. However, 70% of people who get home equity loans are again running up credit debt within one year. Another type of debt consolidation is O% transfers. These offers sound good but can be extremely harmful to the consumer, as any new purchases are still charged interest and any payments made go only to the transferred balance amount.

 

Credit counseling is a fast-growing industry today with thousands of debt management agencies nationwide. Consumers must have a steady source of income and be committed to resolving their outstanding debt to qualify for credit counseling.

 

Debt settlement offers consumers a lump-sum payment option to resolve their debts, but they must save the funds or pay into an account while the debt negotiator works out a reduced settlement amount with the creditors. 

 

Many individuals who are experiencing financial stress would benefit from budget counseling, which is offered by non-profit agencies. Consumers in debt must consider several issues if they are to resolve overdue bills, including coming up with the money to cover the debts, increasing their income or both, and how a particular repayment option will affect their credit rating.