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    How to Go About Weighing Various Debt Management Solutions

    By Busines expert | June 22, 2013

    There are many ways today to manage and eradicate debt, but which solution is right for the consumer depends on their personal financial situation and the types of debt that they have. Debt counselling services can help a consumer decide which type of debt resolution is correct for them and how to best recover their credit and maintain it for the future.

    Consolidation Loans From Family, Friends Or Lending Institutions

    One way that many people attempt to manage debt is by consolidating it to a single loan at lower interest. This means that 20% APR credit cards could be consolidated into a single 8% loan from a bank or even a no interest loan from a friend or family member. However, there are a few things that a person needs to consider about these consolidation loans. Consolidation loans do not lower the amount that is owed, and the loan amount will often be more than the minimum payments even with the lower interest. This means that those already struggling with their monthly budget will not find this extremely helpful. If loans can be consolidated through a family member or friend who will either not charge interest or be extremely lenient with the payback time it may still be valuable.

    Filing Bankruptcy

    Bankruptcy is usually seen as the last resort, but there are times when bankruptcy is the best solution.  If you have no assets such as property and no means to repay the debts back in a reasonable period of time, such as you are not working, earning a wage, etc, then bankruptcy is an option. Bankruptcy does damage your credit and stays on your credit history for a period of six (6) years.

    Debt Consolidation

    Debt consolidation should not be considered the same as a loan consolidation for debt because the two are very different. No one debt management solution will suit every situation, so gather the info you need at ConsolidatedCredit.co.uk. With debt consolidation the debtor enrolls in a debt management plan. The debtor then pays what they can afford each month as shown by a detailed income and expenditure form.  All of their creditors agree that the debtor can use this debt management plan, and it is requested that the creditors freeze the interest on the accounts. All a debtor’s unsecured accounts are to be enrolled in the programme and the debtor is to not open any new lines of credit whilst in the debt management plan.

    Doing this significantly lowers their monthly payments as you are paying what you can afford, not what your creditors demand you pay. . A debt management plan is usually focused on resolving debt within 3 to 5 years, however it can take longer depending on what you can afford to pay each month. It also has no negative impact on the debtor’s credit.

    Debt Settlement

    Many of the same companies that offer debt consolidation also offer debt settlement. Debt settlement involves a debt resolution company or individual approaching the creditors and asking if the debt can be settled for less than is truly owed. Debt settlement can damage a credit report, and it does mean that the settlement amount needs to be repaid quickly. However, it is a great way to settle some debts at manageable levels because not all debts need to be settled at the same time. While it does some damage to a person’s credit report, it can still be recovered from more easily than a bankruptcy. Debt settlement is a good solution if someone has a specific single debt that is larger than all others and that needs to be dealt with now. If there are many debts that need to be repaid, debt consolidation is probably the better response, and if the monthly payments still can’t be made through debt consolidation then bankruptcy may be necessary.

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