Personal Debt - The Way Out
Consumers who have amassed huge personal debt are not alone by any means
. Plain household debt has topped the $2 trillion mark in the United States. That figure does not include mortgages either. That's just consumer debt from credit cards and other unsecured type loans.
That number will be dropping soon due to the weakened economy and the American consumer's inability to spend as freely as before, but it is a number that still has to be paid down. For the many consumers who have out of control debt, they are turning to debt counseling and other programs to try to alleviate the agony of it all. The number one turn to method is debt consolidation. It's a practice that has been around for years, and at one time was the only hope between solvency and bankruptcy.
Debt consolidation can be successful, but only a handful of consumers are smart enough to use it as a tool to eliminate personal debt. The reason for that is financial management. If a consumer wasn't savvy enough not to amass huge credit debt, then the likelihood of becoming knowledgeable and disciplined enough to work out of it may be impossible. So many take out debt consolidation loans, which turns unsecured personal debt into a situation where the loan is secured by valuable assets like property. Any misstep or default and the asset could be seized and lost.
Working toward a better debt to income ratio is the key to getting out of personal debt. Sitting with pencil and paper, the consumer is often stunned at how out of line their spending is to their income. That's the wake up call if it has not already come in the form of phone calls from debt collectors. For the many people who are unable to come to grips with personal debt, there are choices and not just debt consolidation. Debt settlement and debt management are two such programs which merit investigation. In both cases, professional negotiators work on behalf of the consumer. They renegotiate principle balances with credit card companies and then work in much the same way as credit consolidation works. A lower monthly payment is agreed upon, and is paid into one account. It does not require a long term, secured loan and works more quickly too. Most consumers can be out of personal debt within twelve to thirty six months.
Credit ratings do suffer some during any of these programs, but considering that a quicker pay back of all principle means beginning to rebuild credit faster, they make more sense than the longer term ones.
by: Vicki Hall
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