As credit card companies continually increase rates and violate their customers, debt settlement or debt management is becoming more popular. Debt settlement is the act of eliminating a percentage of the debt and establishing a repayment plan that will get you out of debt in just a matter of months or years. Some credit card debt could take nearly a lifetime to pay off, so seeing relief in just a few months or years is a huge relief for most people.
But debt settlement is usually only for unsecured debts. Other debts, such as {second mortgages or first mortgages are not included. This is because these types of credit have collateral to back them up. If you do not pay, the bank will simply take away the collateral with a repossession, or the home, with a foreclosure. One choice to eliminate these debts or to pay them back on a more affordable schedule is bankruptcy. The main problem with bankruptcy is the amount of time it remaindstays on your credit. In most cases, debt settlement combined with a loan modification would be considered more appropriate than bankruptcy.
A loan modification is comparable to debt settlement in that a portion of the mortgage debt may be eliminated and new repayment terms are structured to make the payment more manageable. This can be done by lengthening the term of the loan or lowering the interest rate. A loan modification is considered one of the best alternatives to foreclosure if you want to keep your home. It will make your house affordable again and has very little effect on your credit. In fact, it should begin to build your credit, assuming you have not done anything else to lower your score.
To qualify for a loan modification, you will need to demonstrate that you have experienced a hardship and that a modification would make your mortgage payments manageable for the remaining life of the loan. Many lenders will want you to be behind on payments before allowing a loan modification, but that is not required. Even if you are current, if you can show that the payment is not manageable, a good negotiator should be able to get it approved.
A loan modification should be requested for at the same time as debt settlement. Ideally you want to show all your creditors improving your payment terms. Asking all your creditors to improve a little, is easier than asking one of them to reduce their payment a lot.
In any situation, your credit will be effected to some extent, but when you are no longer able to meet your payments, or if you have already missed payments, then you will not be approved for new credit anyway. Most people only use their credit once every 4 years, so this will give you lots of time to improve your credit and become debt free. This is much better than a bankruptcy that can stay on your credit for 10 years.
Author Resource:-
Nick publishes information on how property owners can prevent foreclosure on their own. His site describes various methods to do this, including foreclosure refinancing, mortgage modification, bankruptcy, and more. Visit the site to download several e-books explaining various aspects of how to save a home: http://www.foreclosurefish.com/
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