Unsecured Debt - A National Consumer Problem
The definition of unsecured debt is simple. It is a loan, which is not secured by an asset or collateral. It is the opposite of a loan such as a mortgage where the item itself can be reclaimed if not paid for in the agreed manner. Even with a weak real estate market and decreasing home values in many parts of the country, it is unsecured debt which has most American consumers worried. And with over $2 trillion of it, there's a good reason why!
While the payment of unsecured debt lies mainly on the shoulders of the consumer, some of the blame for such a huge amount also lies with the lenders themselves. For many years, obtaining credit cards was made very easy for consumers. They were all but encouraged to spend big and spend freely. In reality, any credit card loan is a risk for the lender, but because there was a strong economy and consumers didn't seem to mind the high interest rates, it was good business.
Lending institutions and credit card companies made it all to easy for the average consumer to spend more than he made in income. The weakened economy of today has brought that notion back to haunt both individuals and corporations.
Both consumers and lenders are now faced with unsecured debt that is difficult to deal with, and both sides in the equation are looking for ways to cut losses and get out. In many ways, the consumer is in a better position than the lender. Through programs such as debt management and debt settlement, it is possible to renegotiate principle unsecured debt amounts and pay off a much smaller portion. Lenders are agreeing to this in lieu of situations where they realize they might never see any portion of it back. By agreeing to new, lower principle amounts, the creditors avoid court action and lengthy legal proceeding - that cost them money to do - and take what they can get. While it takes good negotiation and arbitration, it can be done and it can be beneficial to the consumer. The number of debt resolution companies who have sprung up to handle these programs is proof that it works.
The whole of the country is working its way out from under unsecured debt, and there's no reason to go it alone. There are many programs and options available to today's consumer, and by becoming more educated and knowledgeable about options, the faster it is to get out of debt.
by: Vicki Hall
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