Mortgage Loan License

There are four types of debt relief programs that can help people who are dealing with debt that cannot be managed with their available income. Each program can help the consumer depending upon the debt load and the consumer’s tolerance for working with the program. None of the programs offer the perfect solution and every program can have a negative impact on the consumer’s credit report and credit score.

1.  Credit counseling combined with a debt management plan requires the consumer to obtain credit counseling and turn over to a debt management agency their credit accounts and the funds which the debt management company uses to pay the creditor. These programs are offered by both non-profit and profit making organizations. Theoretically, the non-profit company will charge a lower fee. Regardless of the type of company, consumers often complain that they are left with very little money to live on which results in a high failure rate. The credit report can be adversely affected as well as the credit score.

2.  Debt settlement occurs when a skilled debt reduction company or an attorney negotiates a reduction in the amount of unsecured debt extended by a creditor such as credit card companies, medical firms, and unsecured lines of credit. Collection agencies also work with debt settlement proposals. This process requires a skilled negotiator to convince a creditor to settle for a fraction of the total amount owed. This can be accomplished with one phone call or many calls, depending on how the creditor views the debt and the debtor. If the creditor is convinced that a part of the whole is better than nothing there is a good chance of success. Debt relief companies discuss success rates that may or may not be factual, but the debtor need only worry about their debt. Often the fee for this service is the lowest of all debt management services fees.

3.  Unsecured debt consolidation loans are often denied to the overburdened debtor. Some companies make unsecured loans but they also charge high interest and require high monthly payments. The debtor’s credit record can make unsecured debt consolidation loans nearly impossible to obtain. However, if the debtor is able to obtain the loan a comparison of the terms with those of the existing debt load should be made to assess whether the loan is appropriate.

4.  Secured debt consolidation loans are more easily obtained if there is sufficient equity in the home, usually 25 percent, or equity in a vehicle can be the security. There is a problem with these loans because missing one payment may result in the loss of the property or the vehicle. When a secured debt consolidation loan is made to a debtor with bad credit it is likely that the secured creditor will monitor the debt repayment plan closely. The debtor must carefully evaluate the monthly payment to be certain that they can make the payment.

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