Debt Settlement, Credit Counseling, and The Difference Between The Two
January 6th, 2010 by adminAs struggling consumers start looking at debt relief options it’s critically important that they understand the difference between their options, the overall effect each option will have on their financial picture, and whether there is another agenda at work when an option is suggested. Part of the confusion for consumers comes from how companies title themselves.
For instance, credit counseling was once a service originally provided to consumers by non?profit organizations like The National Foundation for Credit Counseling and its affiliates, Consumer Credit Counseling Services. The original mandate for these organizations was to work as a liaison between consumers and credit card companies, negotiating lower interest rates and monthly payment plans for consumers that were falling behind in their payments.
These counseling services were backed by credit card companies with the intent of reaching out to consumers with a third party that was positioned on the side of the consumer. A “negotiation” on behalf of the consumer would take place where interest would be reduced enough to keep the consumer on track and paying his or her credit card bills instead of walking away from the debt.
By the late 90’s, a rapidly rising level of consumer debt started bringing hundreds of opportunistic new companies in to the competition to provide similar services on a “for-profit” basis. Many of these new for-profit companies titled themselves as credit counselors and positioned themselves to ride on the coattails of the better known non-profits while operating with huge advertising budgets and executive salaries. While titled as credit counselors, the new companies offered or pushed consumers toward bankruptcy, refinance, or debt consolidation. While all these options can provide valid solutions for consumers when they are tailored to customer’s personal situation, the for-profit companies posing as counselors often put consumers into cookie cutter solutions that benefitted the company more than the consumer.
Debt settlement is a relatively new and aggressive method of debt relief that, unlike credit counseling, is not sponsored by credit card companies trying to protect their investments. Debt settlement, as a further benefit of being detached from the banks, is also different from credit counseling in that one of the main cornerstones of a debt settlement is obtaining a sizeable principle reduction from the lenders. These reductions can range from 40 to 60% and play a major role in getting the client out of debt. Clients in a debt settlement also see their monthly payments decrease by approximately 50%. The process to pay off debts completely takes 18 to 48 months which is considerably shorter than a credit counseling prescription that calls for no principle reductions, treading water/minimum payments, and a payoff of debt balances that takes anywhere from 4 to 28 years.
There are many companies in the debt relief industry that can perform or recommend strategies to manage debt which has become unworkable. A good company will find the best method and devise a comprehensive strategy to make sure that the outcome is the best available for that client’s specific circumstances.
What is the Difference Between Secure and Unsecure Loans?
November 10th, 2009 by adminBecause of the current economic recession we are finding ourselves in, more and more people are needing loans to pay for things they typically could pay for on their own. They now have to deal with loans and creditors. The problem with this is that there are so many different types of cash loans that it can become confusing. How do you know if you are making a smart choice when getting a loan? You want to do what is best for you but it can be difficult to know if you are doing that. The most common types of loans you will see are secure or unsecured. So, which is better? Secure vs. unsecured loan.
The difference between the two loans is that a secure loan must be accompanied by some sort of collateral. This collateral then could be taken away if you do not repay your loan in a timely manner. An unsecured loan does not have any collateral with it. You simply get the loan because of your good credit rating. If you are trying to figure which is better for you in the secure vs. unsecured loan, you simply have to look at your own personal situation. You have to understand that, what may be a good loan decision for one person, can be the wrong one for another person.
To figure out the winner of the secure vs. unsecured loan battle, you have to see whether you have a good credit rating. If you know you will not get much money from an unsecured loan because your credit is bad, then you should look into a secure loan. Just because you have a bad credit rating does not mean you cannot repay your loan. The only issue you will have to deal with is the reality if you do not repay the loans. You will have to put up some of your personal belongings as collateral, so you have to do all you can to repay the loan so you do not lose your items.
On the other hand, if you know you have great credit and should have no problem obtaining a loan of any amount, then the winner of the secure vs. unsecured loan battle should be an unsecured loan. You will not have to worry about losing any of your personal belongings if you somehow default on your loan.
