Debt Management

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Debt Management?

Is Debt Consolidation for You? . | . Debt management and poor credit . |. Home Equity Loan Rates . | . How to Refinance with Poor Credit

What is Debt Management?

It's easy to get in over your head in debt these days. The home mortgage lenders offered loans on 100% of the value of the house at low to no interest rates. When mortgage loan rates increased and the value of the homes decreased many individuals found they couldn't manage their debt load.

Below are several ways to manage your debt.

Debt settlement is simply negotiating with each unsecured creditor to pay a lesser amount than what is owed to close the account. Unsecured debts are credit cards, medical bills, store credit, and personal loans. Secured loans are secured against an asset such as a home, car, or land. If the debtor defaults the lender can take the asset, sell it and use the proceeds to pay down the debt. However, if the proceeds of the sale aren't enough to pay off the loan, the lender can sue the debtor for the remaining amount.

Debt settlement has disadvantages. Because the loan isn't paid off in full it can be reported to credit bureaus and will impact your credit rating negatively.

Debt consolidation is acquiring a new loan and using the proceeds to pay off all the other debts. The new loan is usually secured against an asset, in most cases your home. The new loan is at a mortgage rate of interest which is much lower than credit card interest rates and for a longer term so your payment can be much lower. The risk is if you default on the new loan you can lose your home. Another risk is that if you don't close the accounts that have been paid off you may be tempted to build up a debt balance again.

Bankruptcy is a last ditch effort to get out from under debt. It legally eliminates the debt. If the debt is secured against an asset you will lose the asset but won't be liable for any additional payments.