Debt Consolidation Loans Likely The Most Realistic Solution

[May 28, 2009.]

 

Some Debt Settlement Programs Add To Consumer's Troubles
Earlier this month, the New York Times reported a few stories of some consumers getting into more financial trouble after seeking the help of certain debt settlement companies. In addition to the high upfront fees mentioned in their report, CBS News also mentioned the high number of complaints filed against these companies and a commonly discovered "F" rating from the Better Business Bureau. In both reports, these debt settlement companies often charged significant fees and failed to deliver on many of their fantasy promises. And if companies were eventually successful, consumers still found themselves dealing with severely damaged credit histories and income tax issues.

In the most severe cases, some debt settlement companies outright defrauded consumers when persuading them to cease monthly payments, and instead deposit this money into a special third party account. Ideally, the debt settlement company would use this growing fund to negotiate a lump sum payment with the creditor to reach a settlement. Surprisingly, CBS reported of some instances where this money mysteriously never even made it to the creditors.

Key Differences Among Various Debt Relief Programs
It's important to remember there are key differences between debt settlement, debt elimination, and debt consolidation programs. As mentioned, debt settlement programs involve negotiations with creditors to eventually settle one's existing debt; often attempted with a lump-sum payment. Debt elimination involves a complicated process essentially trying to eliminate debts based on the premise that consumer credit debt is illegal in the first place. As you can expect, this method is often quite difficult and unlikely successful. On the other hand, debt consolidation loans involve a secondary loan where existing debts are consolidated into a single loan. Homeowners often take advantage of this method by consolidating debts into a mortgage or home equity loan with significantly lower rates of interest.

Debt Consolidation Loans--Eliminate Your Debts The Traditional Way
Of the three main types of debt relief, debt consolidation is certainly the most traditional. In this method, debtors continue to make monthly payments, and creditors are eventually paid in full. While this may not be as appealing as some of the advertisement fantasies one hopes for, it's often proved itself to be the most realistic solution to getting out of debt. And as mentioned before, homeowners with enough equity can often take advantage of lower mortgage rates through these debt consolidation loans. So if you've been struggling to get out of debt, find a debt consolidation specialist in you area for more information by using our site's directory.

New York Times: "Weighing The Option With Credit Card Debt"

CBS News: "Debt Settlement Can Hurt More Than It Can Help"

 

About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.