Debt Management Options For Those Straddled With Consumer Debt
In June, the Commerce Department reported that personal income rose by the smallest percentage in just over year, increasing by 0.1 percent. During roughly the same time period, consumer prices rose 4.1 percent, which represents the largest annual gain since 1991.
It’s no surprise that the Federal Reserve’s recent Statistical Release indicated that U.S. consumer credit rose at an annualized rate of 6.8 percent in June.
As gas prices remain historically high, consumer prices continue to climb, and incomes stay relatively flat, people are depending more on credit cards and other unsecured loans to meet their cash-flow needs.
If you’re like many Americans who have come to rely on credit to make ends meet, it is imperative that you explore your options when it comes to reducing the cost of that debt or eliminating the debt entirely.
Debt Settlement
Debt Settlement is the process in which you negotiate with your creditors to settle for an amount less than what you owe. Your creditors must believe there is a strong likelihood that if they do not settle the account with you, they will not receive any additional payments from you. If successful, you can typically expect to settle the account for 40-60% of the current balance. While this is a great way to eliminate your debt entirely at a reduced cost, it can have a significant impact on your credit rating and ability to borrow money in the future.
Debt Consolidation
Debt Consolidation is the process in which you roll the outstanding balances of multiple accounts into one new loan. The goal of this method is to secure a new loan with more aggressive terms to help reduce the monthly payment and interest cost. Many consumers initially explore secured loans (Home Equity Lines of Credit, Mortgages, etc) since they often come with more favorable terms. If you are unable to qualify for a secured loan, the next category is unsecured personal loans and lines of credit.
Consumer Credit Counseling (CCCS)
Consumer Credit Counseling is a viable option if you feel that you could use assistance with putting together a family budget to help control spending. CCCS can also help with debt settlement by working with your creditors to restructure your debt. The process can often take 3 - 5 years. If you are considering this option, it is important that you research the organizations available to help you. While there are many non-profit and for-profit counseling groups advertising their desire to help you, some are ineffective and or operating fraudulently.
It is unreasonable to think that most American families will never have to rely on consumer credit to make ends meet - especially during times like these. You should put together a plan to help manage any debt you take on prior to it becoming a problem.
Sources
About the Author
Chris Rocks is the Founder and Executive Director of the Credit Advisory Alliance (CAA), a membership based organization helping those who have suffered a financial crisis restore their credit and reinsert themselves back into the credit-driven economy. Prior to founding CAA, Chris had successfully helped consumers achieve their financial goals as both a Financial Advisor and the Vice President of a Mortgage Origination Firm.
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to reign in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
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