Debt is that phase in life which makes it difficult for a person to breathe freely. It is an extremely pressurising condition which makes it very difficult to create an effective plan. When debts start irritating the borrower, then the process of repayment becomes harder to follow especially if the earnings are less and the rebates are very high. There are processes for dealing with debts effectively, but one needs to remain composed for working out a debt repayment plan.
The aid offered by loan for debt consolidation
There are avenues for making a positive change through debt management. If a person decides to manage different debts personally then he/she has to do the following tasks:
• Make a record of all the debts that have resulted from unpaid loans.
• Keep track of current payment to different lending organisations.
• Maintain the due date of installation for every loan.
• Know the sum owed in the case of a particular loan which has turned into debt.
In short, each aspect of all the debts needs to be examined and evaluated by the borrower for making repayments. However, when debts are making a profound impact on the person, then it is essential to seek some relief. It might also become impossible to track the payments and everything associated with the debts in detail because the debt situation doesn’t only break a person financially but also weakens him/her emotionally. If repayment is possible but keeping track of the loan accounts or credit card loans is impossible, then consolidation of all the debts under the umbrella of a single account is the best possible route.
If a person chooses to consolidate all of his/her outstanding payments to different credit sources then he/she will acquire the following benefits:
• No more anxiety about making a series of payments in a month.
• Settling in a manageable situation when the previous debts are closed.
• Removing the present debts with the loan provided by debt consolidation service provider.
• Paying only to the consolidation loan account for clearing all the debts.
• Relief from a higher and multiple interest rates and having only one interest rate for making payments.
• Flexible duration for closing the debt consolidation account.
Comparing Debt settlement with Debt Consolidation
When debts mount, people frantically try to salvage the problem by using any service, but it is at this very point that one should exercise maximum caution and gather necessary information before deciding debt relief.
First and foremost some companies provide debt relief services to individuals who have accomeulated an enormous quantity of outstanding amount and didn’t have the resources to make the payments effectively. There are different options for handling urgent debt issues, but often the function of settlement is confused with that of consolidation. For novices, these terms can even become interchangeable. Hence it is imperative to define and describe both debt solution routes in detail.
The settlement is a debt relief tool that can be used by a borrower for closing the current loan account that has accrued debt. The borrower initiates the closure of this account by suggesting an amount that will be paid instantly. This amount which the borrower wishes to pay to the lending company is quite lower than what the borrower is supposed to pay to remove the debt entirely. The decision of accepting the proposal is dependent upon the credit agency. If the agreement is made, then the sum is paid for closing the loan account immediately.
When debt consolidation is used as a service, then the client will pay a sum every month to a debt solution company. This sum is used to resolve the consolidated debts that are present. Hence consolidation refers to a grouping of different debts for ensuring single and timely payments on a regular basis until the assimilated debt amount is fully repaid. The interest rate is generally lower, and so are the instalment amounts.
Hence both processes are very different and serve different purposes. All kinds of debtors cannot apply for the former option according to their will because for choosing the settlement alternative, a person should have proof to state and show that there is no other option available for making full payment and should also have the settlement figure ready. Whereas individuals can easily apply for the consolidation option because here the whole principal sum is repaid. However, in both options, the decision of the creditors plays a significant role and if they refuse then resorting to other options or relating one’s pitiable financial condition again and again to the creditors might change their mind.
For instance, if a creditor is wholly convinced that the person won’t be able to pay the loan amount in any way, then the credit company will be likely to settle down for a certain sum and close the loan account.
The condition for using bankruptcy as a tool
Using bankruptcy or issuing a legal notice declaring that a particular organisation or person is bankrupt is the very last step that a debtor has to take when all other routes fail to ensure real reconciliation or action. Most people who have massive debts but no asset or source of income opt for bankruptcy. This is not the most used path, but it does exist as a last resort for debtors who are fed up with answering creditors and are entirely unable to acquire funds from any source.
Hence options are created for debt solution depending upon one’s financial situation the best possible step should be taken for decreasing debts.