Debt Consolidation and Reduction

Debt consolidation and reduction is a wise choice for singles or families struggling to pay off multiple bills. The benefits include paying one company instead of multiple lending institutions as well as paying a single interest rate instead of varying rates. Additionally, borrowers are given one set monthly payment instead of being given the option of sending a minimum payment, which usually does little more than cover the interest. Borrowers can expect to see a reduction in their total payments with the assurance that the payment, though smaller, is whittling away the financial burden more quickly. Reducing money owed is seen as a positive choice because borrowers are not asking for their financial burden to be alleviated, they are asking for a more structured payment plan to allow for successful debt reduction.

An excellent option to consider while researching debt management companies is to choose a Christian organization. Many of these organizations are funded through donations which allow them to offer debt consolidation and reduction services at a reduced rate or as a ministry. The main focus of these organizations is to help customers learn and model biblical spending habits. The benefit of reducing their current debt load is seen as a byproduct of biblical living. Many times once we get into financial trouble, we do not know how to fix the problem. This is when it is important to have wise, godly counsel so that not only are we getting ourselves out of debt, we are learning the principles that will prevent us from getting back there. "Hear counsel, and receive instruction, that thou mayest be wise in thy latter end" (Proverbs 19:20).

Paying off money owed is liberating. The weight of overdue bills has been known to destroy marriages as well as cause depression. Debt consolidation and reduction gives borrowers a manageable plan to take control of their finances. Once there has been a reduction in the monthly bills, the hopelessness is lifted and the phone calls from creditors stop. Debt consolidation is a sensible choice to consider if you have had thoughts of filing for bankruptcy. Where bankruptcy is frowned upon by lending institutions, consolidation is seen as a positive, responsible move. There are a variety of credit counseling services that will offer help to those interested in reduction. Before choosing a debt management company, be sure to investigate the background of the credit counseling company. Check with the Better Business Bureau to confirm the authenticity of the company. Check to see if there are hidden monthly fees or a hefty sign-on fee. There are consolidation companies that help with reduction which do NOT require these fees. The desire to reduce your financial burden and get your finances under control is a godly desire. However, there should also be a desire to steer away from spending more money to get out of financial trouble. Find the wisest and least expensive means of debt consolidation and reduction and step out in faith to do it.

Non-profit free debt reduction is an approach to managing financial obligations that provides guidance and support without charging a fee for the service. These services are not loans; they are programs that consumers participate in with the goal of paying off the total balance of debt over time. Using a service of this kind will allow a consumer to consolidate all unsecured loans and make one payment a month that is applied to this amount. With counseling as well as the consolidation service, consumers can avoid getting into financial trouble in the future.

People with financial burdens often need quick, low cost assistance. Non-profit free debts were created in response to the growing number of people who have accumulated crippling obligations. Accumulation of financial obligations is often caused by unforeseen circumstances, such as medical or health problems, or unexpected job loss. As the number of people who have critical levels of obligations grows, the economy overall is impacted negatively. To counteract this trend, non-profit free debt reduction services have been implemented.

Paying off the money that is owed requires the consumer to have a good understanding of all accounts that currently need to be repaid. Non-profit free debts counseling is geared toward identifying all the unsecured accounts the individual has and creating a plan to pay that amount over time. Once the individual decides on an approach, non-profit free debt counselors contact creditors and negotiate on the consumers behalf for lower or no interest rates, and the elimination of over-limit or late payment fees. It is required that the consumer makes a single payment each month, and that payment is applied to the amount owed. The amount paid to each creditor changes as the total balances are paid off, so that an individual can pay off obligations as quickly as possible while still maintaining a reasonable lifestyle. "If you take your neighbor's cloak as a pledge, return it to him by sunset, because his cloak is the only covering he has for his body. What else will he sleep in? When he cries out to me, I will hear, for I am compassionate." (Exodus 22:6)

Financial counseling can educate consumers on all financial matters. Non-profit free debt reduction offers education for consumers about how to stay out of financial trouble, how to plan for purchases, and how to manage unexpected financial situations. They will help the individual create a budget that can be used to manage income, handle other financial obligations, and develop a savings plan. All of these skills help the economy, as well as the individual participate in consumer activities without taking on unmanageable financial burdens. For a non-profit free debts service, the goal is to educate every consumer in how to have a satisfying lifestyle without the stress of financial woes.

Unsecured debt covered by these services includes credit, gas, and retail store cards, personal loans, utility bills, taxes, medical and hospital bills. Non-profit free debt reduction does not cover student loans or secured loans such as mortgage, auto and equity lines of credit. By using one of these services, the consumer can lower or eliminate interest on balances, avoid over limit fees, and steer clear of harassing collection calls from creditors. Utilizing a professional service can also improve the individuals credit rating, as long as monthly payments are made on time consistently.

Debt Reduction Worksheet

Debt reduction worksheets help debtors take the first step toward lowering their due balances - thus, gaining an accurate understanding of the financial situation. Sample debt reduction worksheets are available online, in books, with software programs, and from many financial services companies. This form enables debtors to analyze total due balances so that they might identify the best strategy to get out of money troubles and achieve financial freedom. This sheet works in addition to prayer and commitment. "Hearken unto the voice of my cry, my King, and my God: for unto thee will I pray." (Psalm 5:2)

One valuable piece of information debt reduction worksheets provide is that they show which debts carry the highest interest rates. The form also shows which accounts have the highest and lowest balances. This information can help the consumer prioritize payments, determine which accounts need to be rolled over into lower-interest credit card or loan consolidation accounts, and which will take the longest to pay off. Sheets that are part of a software program can take the data input and make valuable calculations such as how much total interest will be paid on each loan and how long each loan will take to pay off based upon the total and the interest rate.

Even people who are not in debt-trouble yet can benefit from a debt reduction worksheet because it also helps identify how well the consumer is managing total due balances and whether or not they can take on additional responsibilities. Ideally, one's total financial obligations including credit cards, car loans, mortgage, and lines of credit should be less than 40% of their income. People who are above this marker need to reduce spending and work on eliminating the higher-interest accounts.

Consumers can also learn to better budget each month by identifying where their money is going and in some cases, being wasted through the use of a debt reduction worksheet. After placing all their financials on one piece of paper, many people are astounded at the total debt they are carrying. The total can be even more shocking after interest charges are figured into the equation. Paying off accounts earlier can save hundreds in interest charges.

If after completing a debt reduction worksheet, the debtor finds that they can not manage the due balances by simple budget changes, it might be time to pursue strategies such as consolidation or settlement. The debtor should take the sheet to a debt management service for a free consultation. Their evaluation will come with recommended courses of action.

The first step in identifying debt problems so that one might plan successful solutions is a debt reduction worksheet. These simple tools can reveal a wealth of information about a financial situation. This knowledge can prevent a consumer from becoming more overwhelmed by overdue bills and can launch them on the path to becoming financially free by pursing appropriate strategies.

Debt settlement reduction is a method for managing debt that lowers the principal balance, thereby lowering the overall amount of funds owed to creditors - this is at a cost to the debtor's credit rating, so such a decision should not be taken lightly. This form of financial improvement represents a more aggressive approach to lowering financial burdens, often reducing the amount owed by 40-60%, and shortening the time frame for paying off total amounts - often within a 3 month to 3 year time frame. For example, a person may owe a credit card company $10,000, but with reducing and settling, the company may decide that the debtor owes them $3,000 as full payment of the balance, thereby lowering the overall amount by $7,000.

Reducing and settling is an agreement that the consumer helps define regarding payment planning for unsecured loans and credit. The creditors work with debtors and their settlement companies to calculate how much of the total balance that can be paid. Unsecured balances that are covered by debt settlement reductions include credit, gas, and retail store cards, personal loans, utility bills, taxes, medical and hospital bills. Reducing and settling will not cover student loans or secured loans such as mortgage, auto and equity lines of credit.

To qualify for these services, it is necessary to show financial hardship, as creditors will not negotiate lower balances if the debtor's credit shows an ability to pay. Typically, a creditor will consider lowering a balance only when the potential for filing bankruptcy is high. Bankruptcy means a creditor risks getting nothing from the consumer, so lowering the overall balance through a debt settlement reduction is a better deal for them than writing off the balance. It should also be noted that a creditor can still sue for nonpayment, even when a debt settlement reduction has been implemented.

Reducing and settling often involves paying off creditors in lump sum format, and each creditor may have a different approach to payment, so it is necessary to fully understand the terms associated with the settlement negotiated for individual creditors. There may be delays in payment to creditors as the consumer accumulates the total amount needed to pay off a lump sum amount, and debt settlement reductions don't ensure that one's credit rating remains positive. While the debtor saves for the lump sum payment, it is possible to incur fees and non or delinquent payment reports. Debt settlement reductions can lower one's credit rating to a score only slightly higher than bankruptcy, so great care must be taken when considering it as a solution.

There are costs associated with these services, usually as a percentage of either the remaining balances to be paid or the savings incurred. These percentages can range from 8-15% of the total outstanding debt, or 25-33% of the total savings experienced. In addition, the savings realized as the result of debt settlement reduction is taxable by the IRS. Consumers must calculate if the savings experienced are greater than the tax one would pay prior to making a decision for a solving their money problems. "And everyone who was in distress, everyone who was in debt, and everyone who was discontented gathered to him." (1 Samuel 22:2)

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