Business & Finance Debt

Debt Settlement and Bad Credit

For Americans saddled with debts they can't pay, there can be a sense of isolation.
Whether from medical bills, college tuition, housing, or car loans, it is incredibly difficult for the ordinary citizen to not struggle with mounting financial obligations.
You might be apprehensive about admitting your troubles to friends, to your accountant, to a business partner, or even a spouse, but debt is an issue shared by millions of our countrymen and should not be a source of embarrassment.
There are a number of strategies for settling your debt effectively in a way that will preserve your financial well-being without making compromises that could hinder your financial flexibility in the future.
This is where debt settlement can help.
You may have seen advertisements extolling the virtues of debt consolidation.
Indeed, consolidation of debt can have definite virtues, not least of which is the convenience of condensing multiple payments and debts into a single monthly bill, which may in many cases be tax deductible.
For example, because of vicissitudes in the real estate market, many new loans are being offered only on a time-limited basis.
Individual loans based on personal or even industry-wide concerns may lower interest rates below projected values and create stability in the market even after expected drops or hedges against instability.
The key is to figure out what type of consolidation plan works best for you.
Debt consolidation has been the most popular type of debt relief over the past 6 years.
Even though consolidation does not relieve existing debt, it can nonetheless make existing debts much easier to manage.
Typically, debt consolidation loans involve a second mortgage on a primary residence - there are unsecured debt consolidation loans but they tend to have interest rates nearly as high as those of the credit cards debtors wish to pay off.
There are obvious complications when borrowers tie their existing financial burdens to what is usually the average American's greatest investment - the family home.
Put simply, even for those homeowners that can still take out a second mortgage considering the drops in home value across the nation and the crash of the sub-prime lending market, there's still something dangerous about removing hard earned equity from your home.
(most borrowers who need such a loan to pay mounting credit card bills would be considered sub-prime purely because of their debt to equity ratios) When tragedy strikes, whether medical emergency or sudden unemployment, home-owners should then and only then use their home equity.
Otherwise, especially in the time of such a depressed real estate market, they leave themselves open to potential foreclosure should the worst happen.
Another thing to remember, despite promises from debt consolidation companies, consolidation may not improve your credit rating.
Solidifying your borrowings into a single loan does have distinct advantages, not least of which is the peace of mind and inevitable convenience of owing money only to an individual lender.
Nonetheless, placing the bulk of your debt into a single account may paradoxically cause your credit rating to worsen.
The reason for this is that you might lessen your total amount of available credit, even if you have negotiated a better interest rate on your remaining debt.
Keep in mind that in all future transactions, especially when buying a house or a vehicle, your debt load is important to determining your prospective financial viability.
You do not want too much debt, of course, but you also don't want the debts too concentrated.
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