Debt Reduction Strategy

Debt reduction strategies are commonly used in today's society because the national consumer indebtedness has risen to an unbelievable 2 trillion dollars, which averages each household at $18,000 not including mortgages. If mortgages or student loans are added onto this surmounting total, the amount owed is considered astronomical. Most families reach this amount in very small increments. Each debt reduction strategy can be used in conjunction with a predetermined future lifestyle budget. Knowing what kind of budget a person will have after it is paid off is sometimes more important than the actual debt reduction strategy used. Consumers get excited about the opportunity to keep more of their paycheck. Just because someone needs this type of service doesn't mean that they are less of a person in anyway, just that the general expenses of life are greater than their income.

Over 50% of marriages end in divorce because of flawed strategies in finance or none at all. Obviously the toll that debt takes on an individual's family life is just as great a toll as it takes on their financial life. Whether a person is currently in debt or not, it is a good idea to have a plan prepared for what action will be taken if a problem surfaces. Coming to terms with the need for debt reduction strategies is the first step in becoming a debt-free American. When debt reduction strategies are not taken, the consumer remains in debt and as such remains a slave to the creditor. Almost everyone has money to be paid to someone in some sort of way so it is just a matter of a realistic plan in order to get closer to a debt-free life.

2 Corinthians 3:17 says "Now the Lord is that Spirit: and where the Spirit of the Lord is, there is liberty." God desires us to live a fruitful and free life, not a life of slavery. A debt reduction strategy to get back on track and back to living that free life is highly recommended. Those that are seeking an organization that provides debt reduction strategies should first review the organizations rating with the BBB or Better Business Bureau. The BBB can be fully accessed online and enables a consumer to view lists of complaints or compliments provided by previous consumers. It is suggested that caution be taken when choosing an agency to discuss all income and financial information with.

Debt reduction solutions are creative courses of action that can help address the accumulating money owed that seems more insurmountable every day. There are many reasons to seek these services: too many bills to pay and not enough money, unexpected medical bills or using unethical ways of paying bills. A debt reduction solution can help a person avoid bankruptcy, reduce monthly level of money owed, rebuild credit, and move a person toward financially-responsible living.

These services are ideal for people that have fallen behind on payments. There are a variety of debt reduction solutions. Evaluate the personal situation to see which solution might be best for the circumstances. Consolidation takes all current money owed and rolls it into one large loan at a lesser interest rate than the individual creditors are likely charging. Use the loan to pay off creditors and then pay one monthly fee to the bank. The result is hundreds if not thousands of dollars in interest savings, but no actual reduction in the principal amount.

A home equity consolidation loan is a good place to look because in addition to the interest savings earned by financing debt at lower rate, the interest on a home equity loan is also tax deductible. Plus, home equity loans can be spread out by as long as 30 or 40 years. While longer loans result in increased total interest costs over the life of the loan, they do result in a much smaller monthly payment, which might provide a better debt reduction solutions if current income is limited. God wants to bless us when we take even the smallest step toward financial freedom. Remember this verse in Matthew 25 verse 21: "His lord said unto him, Well done, thou good and faithful servant: thou hast been faithful over a few things, I will make thee ruler over many things: enter thou into the joy of thy lord. "

In contrast to consolidation which does not reduce the lump sum of money owed, settlement is where a hired financial service negotiates with creditors to reduce the amount owed significantly. It is also possible to use this debt reduction solution personally. Debt settlement companies work with creditors to get them to agree to a repayment of 50-70% of what is owed. The end result is a smaller amount of money owed. Not all creditors are willing to negotiate. Secured debts, where collateral such as a car is held as security for the loan, can rarely be negotiated.

Additional choices include paying off debts by selling off some assets such as jewelry or cars. Perhaps a vehicle can be sold and replaced with a much older model, using the difference in price to pay off bills. Try to find credit cards that have lower rates. Sit down and evaluate each debt reduction solution to see which is best for the personal situation. Becoming debt free is a reality for those who identify and follow debt reduction solutions.

Debt Reduction Software

Debt reduction software is available for those who wish to organize the payment of their debts in a professional manner without using a professional debts management service. It can also be used for those currently serviced by a financial management service provider as a tool to organize and keep track of their debt. The computer program can provide many benefits that home computer office software cannot. These benefits are specifically tailored to create the fastest and most effective way to eliminate and manage the elimination of bills and payments from an individual's personal financial portfolio. The software can also be used for small businesses.

Consumer debts in the United States has surpassed Two Trillion Dollars, twice the amount that it was a decade ago. A consequence is that over 1.6 million personal and non-business bankruptcy cases were filed in the United States in 2003. This is a staggering amount. 1.6 million people were unable to pay their debt off. Something is wrong. Americans are enticed by lenders to buy, buy, buy, and lenders are charging interest rates on these items upwards of 22%-30%. Allowing a debtor to pay a minimum monthly payment of $15 at 22% on a balance of $2500 puts the debtor $30 more due to bill collectors each month. Compounding the interest with the growing balance ensures payment failure. Debt reduction software is part of the solution to this issue.

The key features included in these programs are the discovery of what actual interest is paid to a creditor each month. By knowing this number, a consumer will be aware of what the "minimum payment" really is in order to keep the balance the same. Any money added to the monthly interest will go to pay down the debt. Since interest is compounded, this calculation needs to be figured out on a monthly basis. Most people don't have the time every month for mathematical equations for each creditor. The debt reduction software, once information is imputed into the program, figures the correct calculation every month. This keeps consumers on track, and not ignorant to their debt balances.

These financial programs are available at most computer or office supply stores and can also be downloaded off the internet for a fee. There are also some basic debt reduction software programs offered free of charge, however, most of the free programs do not offer the in-depth advice and resources for those wanting to be exposed to every avenue of debt relief. Once information is added to the program, the numbers are correctly calculated to give the consumer an overall picture of their personal finances. It can also create a realistic budget determined by the consumers imputed needs and desires. If we are to live the lives of freedom that Christ intended, the guilt and stress of owing a fair amount of debt to creditors will rob us of that freedom and of our true place in the body of Christ. "The small and great are there; and the servant is free from his master" (Job 3:19).

Debt reduction settlements free debtors of overwhelming bills and loans through professional negotiations. Once the process is complete and a payment plan is reached with all creditors, the debtor will attain financial freedom and will hopefully have learned to manage their finances with much more care and with less careless frivolity. The misuse of credit which requires a debt reduction settlement is akin to the root of all evil as expressed in 1 Timothy 6:10: "For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows."

The debtor isn't "off the hook" or relieved of paying back their debts through a debt reduction settlement. The arrangement is actually a payment plan to help the debtor take care of repaying their accounts by reducing the balance due in a manner that helps them be successful at that repayment. This technique can work without destroying their credit. It will also satisfy their creditors enough that they will close the account as "paid in full."

Debt elimination tactics are totally different from a debt reduction settlement. The overdue amounts will indeed be eliminated, but not wiped out without repayment of a considerable portion. The amount eliminated is determined within the negotiations. However, the creditor must be satisfied that they are being paid a fair amount while still helping the debtor to likewise fairly settle debts without financial annihilation. A mutually agreeable payment plan can be made to clear the bill and satisfy both parties.

It is important to note that while negotiators are working out the details of debt reduction settlements, that normal payments must be continued by the debtor. Any unpaid amounts only cause the debtor's credit to become increasingly unsatisfactory and will take years to be repaired for future credit consideration. Of course, that could be considered a good thing so that following a debt reduction settlement, debtors will be less likely to obtain new credit and repeat the cycle of indebtedness. But that is definitely NOT the best way to handle the situation - as a hard lesson learned by shackling one's future need for credit.

An experienced professional credit counselor should be the one to negotiate contracts with creditors. Efforts to reduce a full slate of accounts can be difficult if attempted by the common consumer. Debt reduction settlements need to be negotiated carefully in order to accomplish a payment plan that best benefits the debtor. But it also must accommodate the creditors' repayment expectations. Debtors need to get recommendations and check backgrounds in order to hire a reliable negotiator and get on the path to financial relief.

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