Best Finance Network
Get the best connectivity about finance.

If you are in debt, chances are high that you are looking for a solution to be debt free as quickly as possible. The three most common forms of debt solutions are debt consolidation, debt management plans, and debt settlements. Debt relief can also involve:

• extending the terms of loans
• lowering loan interest rates
• partially or totally reducing the amount of the outstanding principal

Typically, creditors will opt for debt mitigation if it’s a better alternative than debt default when the repercussions are too severe.

The 5 most common Questions asked by Debtors

While every debt relief case is different and no two debt relief companies are exactly alike, there are 5 questions that every individual usually asks when exploring their debt relief options. These are:

Are there any guarantees that all of my debt will be settled? Unfortunately, NO. Every debt relief case involves some type of negotiations. No debt relief company can guarantee that kind of an outcome or how the negotiations are going to proceed. The success of the debt relief company is usually based on the debtor’s ability to save enough money each month to cover the payment amount that will be due.

Can I negotiate with my creditors? YES, you can, if you want to save anywhere from 18% to 25% off the debt you owe. Most debt relief companies are going to charge you between 15% to 25% depending on how much you currently owe and the state you live in. Many people call debt relief companies so they can avoid dealing with creditors as much as possible or because they lack the confidence to negotiate with them.

How much time is involved in becoming debt-free? That typically depends on how long it takes you to accrue the funds and save up the settlement amount. Debt relief programs can range from 24 to 48 months. So, the faster you can save up the money to make that settlement offer, the sooner you’ll be out of debt and feel financial relief. Just remember that it would take 10 to 20 years to pay off a credit card if you only make the minimum payment each month. Plus, you could wind up paying 2, 3, or even 4 times the amount you originally owed.

Will debt relief impact my credit? YES, in varying degrees depending on the debt relief option you choose. Typically, the immediate impact to your credit score will range from relatively minimum or small to severe damage while the long-term impact ranges from a minimal to extremely long recovery period.

Will I still get calls from bill collectors? Unfortunately, this is still a possibility despite the federal and state legislation that was designed to protect the consumer from being harassed by debtcollectors. Just keep in mind that the goal with debt relief companies is to get the creditors to call them and not you. That will save you hours of phone-calls and harassment.

If you are worrying about the huge debt you have incurred, its time you take some professional help. There are many debt counselors who listen to your problem, enquire about your lifestyle, and come to a conclusion about your financial status.It is then that theyadvice you to take necessary steps to counter your debt. In this article, we are going to discuss how debt consolidation loans and their types.

Why do people become indebted?

In this era of consumerism, everyone is exposed to the tricks of marketing strategies. It does not matter whether you are a business owner or a service holder. Our needs and expectations have compelled us to live a life based on credit. You have everything you want, but you also have to pay a monthly amount to the credit providers.

Mentioned below are some of the things that generally push people into a credit mongering spot.

• Clothes
• Monthly groceries
• Cell phone bills
• Car expenses
• Petrol or diesel
• Household tools
• Furniture

Over-indebtedness is quite a common occurrence in the US society. There are numerous people like you who reach a position when they cannot pay off their debts anymore.

What do you understand by debt consolidation?

The procedure of simplifying repayment of debt and saving you money is called debt consolidation. It involves taking a new loan at a lower interest rate for paying off smaller debts.

When can you opt for debt consolidation loan?

As a layman, you might not consider debt consolidation to be a useful way to pay off other loans. However, given the situation that you are being repeatedly being harassed by numerous creditors, you can opt for credit consolidation. It is the most effective and the finest solution under such circumstances.

Payment notifications convert into harassment when credit providers hire external agents to recover your debts. If you thing that your debt has reached out of your grasp and people are harassing you unnecessarily, you can opt for debt review. The debt counselor will enquire into your expenses.If he or she realizes that you are overburdened with debt and are being harassed unnecessarily, he or she will suggest you to consolidate your debts.

What are the different types of debt consolidation loans?

# Personal Loans

This is the most common loan suggested by debt consolidators to those who do not own a home. The rate of interest on this type of loan depends on credit score. It is a useful way to displace your existing debt; provided the debt counselor plans its utilization properly.

# Home Loans

If you have a home, you can opt for a home loan because it comes with low rate of interest.

# Secured Loans

If you are encountering bad credit, the counselor can also suggest you to get secured loan because of its reduced interest rates. The loan type gets its name from the practice of attaching a security to the loan amount. You have to attach an asset as security for being eligible for this loan. The asset lowers the interest rate on the loan. The financial institution also finds itself in a secured position in case you cannot repay this debt. The mortgaged asset should be high value things like, your house, car, plot of land in your name, etc. Your motive should be to return the loan amount to the financial institution. Otherwise, your assets will be repossessed.

With a huge debt and multiple creditors you cannot lead a stress-free life. But, if you consolidate the debt, you can pay off all creditors. Debt consolidation is very effective as you don’t have to worry about the creditors and the process is quite fast.

There are a lot of advantages to choosing a structured settlement over a lump sum award. Most importantly, structured settlements are guaranteed to provide for the future needs of the injured party receiving the payments. Actually, most of the time, a structured settlement will provide for the personal and medical needs of an injured person for their entire lifetime. Lump sum awards, on the other hand, sometimes end up being wasted through poor investment strategies, overuse, and the ups and downs of the stock and investment market. The American Association of People with Disabilities endorses structured settlements, arguing that they could be the best and safest means of being sure an injured person who wins a tort case is provided for throughout their lifetime.

The second advantage of the structured settlement is the unique way it is managed by the tax code. More often than not, annuity payments are untaxed, meaning that more money makes its way into your pocket. Lump sum payments, in contrast, can incur a substantial tax burden which can mean that you will defintiely end up paying more taxes in the end.

Structured settlements also offer very much flexibility. In reality, no two structured settlements are the same, because each one is arranged to take into account the specific present and future needs of the injured party. For instance, several people will have the desire to receive a small annual sum, while others may want to receive several larger sums spread every few years or arranged around significant life events. Structured settlements could also be arranged to provide more money for the claimant later in life or more money as the claimant’s medical condition worsens. There are no limits to the different possibilities of the structured settlement, because it is a private arrangement between claimant and defendant.

Lastly, structured settlements have a number of exceptional advantages which end up increasing the net amount of award money for many people. For instance, your money cannot be reduced by divorce or the receipt of social security. Additionally, you may end up netting a larger award because you have to pay out less for lawyer and court fees incurred during a lengthy court battle.

You can also have the option to sell your structured settlement should you wish to cash out later down the road for a lump sum payment. There are many companies out there that specialize in this. Always take into account that companies who procure structured settlements from people have only one goal, to gain profit from their purchase, which is why occasionally their offers are a bit low. You can yet try approaching more than one company if you hope to sell a structured settlement, just to make sure that you get the highest payoff.

Ensure that the company who wants to buy your settlement is well established and well-funded. You do not want to trust your money to some fly-by-night company disappearing or going bankrupt even before paying you the buyout amount.

Ruth Rogers is a freelance writer that specializes in various financial topics like structured settlements, investments and money management.