Suffering from overwhelming debt is not a position anyone wants to be in.
Luckily, there are several options one can pursue when attempting to resolve their debts.
However, each of these debt resolution styles comes with additional risks and benefits that should be considered.
Negotiation As the least intrusive option, debt negotiation can help lower payments without the need of lawyers, court intervention or the risk of credit consequences.
The best thing about this option is that it allows the debtor to deal with their creditor directly and work out a plan that suits both parties.
In most cases, creditors are willing to negotiate debts in order to minimize the risk of losing money if the debtor decided to seek more extreme options.
In general, it can be a great option for anyone who is looking to gain control over their debts and maintain payments with a little flexibility on the part of the lender.
The only concerns with debt negotiation is that they take persistence on the part of the debtor and that creditors may be less willing to negotiate if the account is already considered delinquent.
Settlement A commonly advertised solution to managing debts is debt settlement.
This typically involves a type of debt negotiation in which the creditor agrees to accept less than the actual amount owed on the debt, as opposed to lowering interest rates or minimum payment requirements as in a regular debt negotiation.
This is usually an option for those who are experiencing financial hardships and may already be delinquent on the account.
Securing a good deal can be tricky and always requires final approval from the creditor in order to be considered valid.
Points of caution with a debt settlement include the effort it will take to prove financial hardship and the importance of getting the deal in writing.
Consolidation Many people have either heard of, or know someone who has gone through, a debt consolidation.
Debt consolidation is much different than a negotiation or settlement agreement.
Consolidating debt essentially creates a loan to be repaid to a single lender in exchange for that loan paying off all other debts.
The appeal is that all payments are "rolled into one", making it easier for the debtor to maintain payments on the single debt.
However, these types of loans tend to carry higher than average interest rates, which can cost a person far more in time and money in the end.
These loans are generally not a good idea for those experiencing financial hardship as they "trap" people into a debt repayment system that takesmuch longer than other alternatives.