Debt Consolidation, Debt Management & Debt Settlement – 3 Debt Help Options

When it comes to debt help options to pay off unmanageable credit card debts, there are three very favorable options. They are debt consolidation, debt management and debt settlement.

Before you decide to sign up with any of the debt relief options, it’s important to have a thorough understanding of debt consolidation, debt management program or debt settlement plan so you can choose the option that best suits your needs to help you settle your debts.

Debt Consolidation. Debt consolidation comes in two forms; secured and unsecured.

Secured debt consolidation is the action of combining several loans or liabilities into one loan; it takes all of your high interest credit card debts and turns them into one low interest loan.

Often you have to be a home owner to qualify for a secured debt consolidation loan called home equity loan.

With a much lower interest rate than your credit card interest rates, secured debt consolidation enables you to pay on the principle and that thus helps you to eventually get yourself out of debt.

But a word of caution, though. A home equity loan is a secured loan; the bank can take away your house if you fail to make payments.

Debt Management. Credit counseling and debt management agencies, be it non-profit or for profit, work to help you learn to get control of your finance.

Through debt management, you are educated on how to make a budget and stick to it and often help you make a schedule to follow for paying off your debts.

If it is determined that credit counseling is not enough to help you get you out of debts, you will be recommended to enroll in a debt management program.

A debt management program, also known as debt management plan, restructures your multiple monthly payments into one monthly payment, and thus resulting in lowering the total monthly payment previously paid.

When a DMP is recommended, a certified credit counselor will be in charge of negotiating with your creditors to reduce interest rates, eliminate late fees and over-limit payments, and create a manageable repayment plan for you to follow.

A debt management plan is right for me, therefore I enrolled in a free debt management program available in my country last year. I have been in the program since October 2008.

Debt Settlement. Debt settlement is an approach to debt reduction in which the debt settlement company renegotiates the amount of debts you owe with your unsecured creditors and convince them to give up their demands for the full repayment of your debts and instead to accept a lesser amount.

See the difference between debt management and debt settlement clearly; debt management means paying a monthly payment while debt settlement means paying the whole amount up front.

In order for the debt settlement program to work, you have to have a large amount of money on hand for a one time sum. Inability to meet this requirement will probably end up with you getting calls from a collection agency and facing with even more debts.

Debt consolidation, debt management and debt settlement are often favorable debt relief options because they allow you to get out of debt faster without having to declare bankruptcy.

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