There are many diverse methods of reducing and reassigning common consumer debt to more effectively manage available assets as needed for payments while retaining sufficient funds for daily essential needs. The best plan for paying down consumer debt and handling related payment insufficiencies often depends on how the debt initially arose.
A secured debt is a non-negotiable debt backed up by some kind of collateral which can be retracted or taken by the lender if the borrower defaults or fails to pay the debt. The security element protects the lender against the risk he lender takes on in lending funds to the borrower. The most common example of this type of loan is a mortgage on a home. The home is the collateral for the debt the homeowner takes on from the lender providing the money to purchase the home. The bank or lender can seize the home, sell it and use the proceeds to pay back the debt if the debtor fails to pay on his mortgage loan. The security element involved in these types of loans often provides for a lower interest rate by the lender for the reason that his inherent risk is less than in an unsecured loan. These types of debts are rarely renegotiated by debtor services for the reason that they usually arise pursuant to contract. The debtor and the lender can agree to renegotiate the contract itself such as a refinancing of a home mortgage but that usually involves a process fully satisfying the original loan before entering into the new and more debtor friendly agreement or consumer debt settlement.
Other secured loans include loan such as student loans which may be reduced by consolidating multiple loans into a single loan to facilitate a situation where the final debt is held at a decreased interest rate. Auto title loans are also secured loans. The lender often retains title to the car until the debt is repaid in full by the debtor. If the debtor defaults on the debt the lender will repossess the car in order to sell it and use the proceeds to repay the debt.
An unsecured loan is a debt that is secured only by the debtors "creditworthiness" or the validity of his promise to pay and not on some type of repossession element or security. Most lenders hedge their risk of debtor default by demanding a high rate of interest on these types of loans. The higher interest charges and loan related fees provide them with a measure of protection against losses often incurred by defaulting debtors. The debts of defaulting debtors are in a sense ultimately paid by debtors paying on time by way of higher interest rates and elevated loan fees.
Other types of unsecured loans are commercial paper better known as personal checks, credit card debt, credit union debts, cell phone bills and medical bills. These types of unsecured loans are the only debts where original lenders may be willing to negotiate a reduced payment or reduced balance with the debtor or a credit counseling service.
Credit Card debt is a good candidate for consumer debt consolidation or consumer debt negotiation with an ultimate full consumer debt settlement especially if the debtor is a considering filing for bankruptcy. The credit card company or bank will often agree to a consumer debt reduction or settle with the debtor or his legal representative for significantly less than the original debt, often thirty cents on a dollar, if it reasonably believes the debtor will file for bankruptcy placing the credit card company at genuine risk for receiving zero on the debt in the bankruptcy proceeding.
Credit counseling services and consumer debt settlement attorneys can professionally represent a delinquent debtor's interests to a creditor of an unsecured loan or debt and often negotiate a lower interest rate, adjusted balance due and take important steps that can protect the debtors credit rating, provide a open door to get out overwhelming debt and preserve his rights and interests for a fresh start and a brighter tomorrow. This is not the time to try "do-it-yourself" consumer debt negotiation and repayment tactics for perhaps it was that kind of ineffective planning that got the debtor into this mess. It's time to let a professional consumer debt attorney handle that problem.