Revolving/Installment Loans

As with mortgages, when revolving or installment debt becomes overwhelming, there are several ways in which to bring them under control.

Debt Consolidation

Most difficult to obtain, however one of the best solutions is a Debt Consolidation Loan.  This is also one of the most misunderstood and certainly misrepresented solutions. These are commonly made by borrowers who have the ability, through strong banking relationships or by pledging security in an asset, to receive a lump sum loan in which all revolving or installment debt is paid. This loan typically involves an interest rate significantly less than what is charged by credit card companies.  In addition multiple payments are reduced to a single payment which simplifies budgeting and record keeping.  As mentioned, these loans are not easy to get and it also requires the consumer to be disciplined enough not charge the revolving debt up again.

Debt Settlement

Another option is debt settlement.  This is often represented as debt consolidation and can be a feeding ground for predatory practices. The consumer is asked to put money into an escrow account for a predetermined length of time. During this period no payments are made to the creditors, however the settlement organization does collect their fees. The ideology of this strategy is the creditors will become more willing to negotiate the debt when there is a longer period of nonpayment.  Not only is it not necessary to fall behind on your debt in order to negotiate a settlement, it will have a detrimental impact on your credit and there have been incidents where organizations have taken the money and never negotiated any debt leaving the consumer high and dry.

Debt Negotiation

True debt negotiation is an excellent solution for these issues. Debt negotiation does not require strong banking relationships or equity in an asset.  The consumer does not have to place their money in an escrow account and it doesn’t even require the consumer to be delinquent on their payments. A true debt negotiation requires patience, persistence, the knowledge of how to negotiate the debt, and certainly the ability to make the negotiated payments.

Bankruptcy

When the solutions above do not seem to be viable options consumers may need to seek protection under bankruptcy laws.  We strongly recommend consulting a professional bankruptcy attorney to get all the facts before making a decision of this magnitude.