Personal Debt Consolidation

Personal Debt Help

Trying to get debt free may not be easy, but it's certainly not impossible. The first thing to do is to identify your debt and assess the size of the problem, and then you can start to take measures to resolve the situation. What exactly is your personal debt? Do you have outstanding credit card debts? Have you failed to repay a personal loan? Do you own money on your car? Once you have been honest with yourself and know exactly where the debt has come from and how big it is, you can start to look at strategies to get debt free.

Debt Consolidation

Consolidating debt can be a great way to deal with your financial problems. With debt consolidation you lump together a number of smaller debts, that in themselves may not add up to much, but combined become a fair amount of money, and then cover all those debts with one, bigger loan. To consolidate your debt in such a way, you need something to draw capital from. For many people this is the house they have bought, or are buying, or their car. Equity in the property or vehicle is used to consolidate the smaller debts (credit card and mobile phone bills, for example).

Non-Conforming Loans

Many of us have a bad credit rating – maybe we fell behind on mortgage repayments or failed pay off our charge card bill. A bad credit history usually means that banks and retailers see you as a credit risk and become unwilling to offer you any further credit such as loans or installment purchasing. So how do you find the funds to buy a new car when you old one finally gives up the ghost, or to revamp the kitchen if the bank and shops won't touch you? You may need to look into non-conforming loans. Lenders who provide non-conforming loans supply secured loans and will lend you money as long as you have something to offer as collateral. For example, if you wish to borrow money to see your business through a difficult period, the loan company may give you the cash as long as you use your car to guarantee it. The downside, of course, is that if you default on the non-conforming loan, you will lose your vehicle, but for many it is a risk worth taking.

Debt Agreement

If you have debts that you can't pay and have nothing to offer as collateral to secure a loan, you may have to consider a debt agreement. A debt agreement is negotiated with your creditors (the people you owe money to) and is a way for the two of you to come together and find a compromise where you can clear your debt and they can get their money back. There are a number for prerequisites that must be met for you to enter into a debt agreement and it is best to seek professional debt advice before you take that step. However, if you meet the criteria and are insolvent – cannot pay your debts on their due dates – a debt agreement, in it's simplest form, will enable you to repay your debts over an extended period of time at a rate that is acceptable to your creditor and possible for you. There are numerous financial companies who specialise in insolvency and it is preferable that you talk to one of them to see if you as eligible for a debt agreement and also to ensure that once the agreement has been reached between yourself and those you owe money to, that it is legally binding.

It is important to note that entering into a debt agreement is not the same as declaring bankruptcy, though it is "an act of bankruptcy". It is seen as an alternative to bankruptcy.