Debt settlement

Debt Settlement Also known as Debt Arbitration or Debt Negotiation, is an aggressive approach to debt reduction, which may be appropriate for debtors with serious amount of debt and are considering bankruptcy. A debt settlement agency negotiates with the creditors to settle the debt for a lower amount than owed, as the debtor saves their money for a lump-sum settlement payment. During the debt settlement process, the debtor will obtain a letter from the creditor stating the debt obligation was fulfilled. The creditor will typically make a report to the credit bureaus that the debt has been “Settled for less than full amount”, “Paid” or “Settled”.

Creditors will usually only settle for less than owed when the debtor is under serious financial strain because if the debtor chooses to file bankruptcy, then the creditor is at risk of receiving only a small portion of the original debt. If the debtor does not demonstrate financial hardship, the creditor may refuse to settle the debt and instead choose to pursue additional collection activities, including legal action.


refernce :http://en.wikipedia.org/wiki/Debt_settlement

The know how of debt consolidation loan

Debt consolidation loan is a loan that people take to pay off their other existing debts. With the help of debt consolidation loans, the amount owed can be transferred into one monthly manageable payment. It will help in lowering the rate of interest and will also reduce your monthly outgoings.

There are two types of debt consolidation loans - secured or unsecured. A secured loan uses something of significant value as collateral such as your car or house. In most cases it is your home. Until and unless the loan repayment is not fully made by you, the creditor holds the right of your possessions and once the payment is fully done, the right of possession comes back to you. Secured loans have a lower interest rate and are usually opted in cases where larger amounts are borrowed.

If you have a relatively good credit score then you may be able to obtain an unsecured loan. Unsecured loans can be used to get rid off higher interest debts, such as your credit card debt. An unsecured loan is not secured against ay asset hence it comes with higher interest rates. People usually go for it when they borrow smaller amounts.

Whether it is secured or unsecured, the debt consolidation loans that you can avail will depend on your credit score. People who have a poor credit can still opt for debt consolidation loans. But, they have to regularly make payments on time and in full because one late payment can bump down their score.