Most people have some form of debt. Few can afford to buy real estate for cash so the alternative is a mortgage which is usually taken out over a fairly long period. While the recession identified that real estate can be a risk that is certainly not the norm. Someone who takes out a mortgage is likely to find a growing asset over the period of the loan. However when it comes to other forms of borrowing the picture is less rosy. The recession is fading away but even now the average American has over $15,000 in unsecured debt according to the Urban Institute which is a Washington based think tank with no political allegiance. That in itself is not a problem except it appears one in three Americans are not able to service their debts; they are in debt collection.
Some people bury their heads in the sand and hope their problems will go away. Invariably they don’t and they should all seek help of some kind. There are bodies that will help includingthe National Foundation for Credit Counseling based in Washington, D.C. The problem is even more acute for the elderly approaching retirement because there are no overnight solutions. It can often take up to 5 years to get free of debt in the worst case scenarios. Those who are close to retirement when they will no longer have substantial income in the majority of cases face the biggest problem.
There are different processes that may be the answer. Debt management is a plan that must be devised and followed in order to become debt free. It is slightly different from debt consolidation where the total liability is addressed by attempting to settle the individual debts by putting them into a single loan that is paid off over a period. This is where the 5 year illustration comes in.
There are agencies that will help and the selection of someone to use should be based upon whether they appear to be service orientated and understanding of the need to prepare a plan and implement it. Even if the agency is described s non profit making that does not mean there will not be fees involved in providing the service. Those looking at such agencies should identify this from the outset and not just agree to the first one that looks willing to help. That is a tendency that comes from being in a position of desperation.
Debt settlement agencies are likely to be the most expensive route to take even though on the surface the agency will look to negotiate with creditors to reduce a client’s total debt level. While negotiations are ongoing it is unlikely tht the phone calls and letters from creditors will stop incidentally. The prime reason for taking action by contacting an agency in the first place is to get the letters and calls to stop.
Many of the good agencies will offer a free initial consultation and follow up with a good basic repayment plan that is relatively inexpensive. Ideally people should seek someone fairly local. Although it is sometimes difficult and embarrassing a face to face meeting will usually produce the best results. The small print is always important in any agreement made with a third party which claims to be the solution to someone’s problems. Anyone who is doubtful about their ability to understand the detail should get a family member to help if there is someone more capable.
On occasions a creditor can be approached personally in an attempt to solve a problem. The last thing a creditor wants is a bad debt that produces nothing. They may well have had many of those during the recession and understand the consequences. If the creditor will reduce the interest rate on realistic loans or credit card for example that is good news; every little helps. As long as the reduction is permanent and the rate will not rise in the future that is good news.
The main thing is to understand the reasons for the debt and identify whether there is an ongoing problem of too must expenditure for the income being produced. There are solutions to debt problems but they need to be permanent; no one wants to get a return ticket back to debt.
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