The Different Kinds Of Debt And Debt Relief Options
Most people are used to a systematic monthly budget on which the daily expenditure runs. An unforeseen expenditure like medical emergency suddenly crops up and in order to meet the sudden calamity one has to resort to an external monetory source. Private or public financial institutions like banks have lengthy and complicated paper works. So automatically people fall back on private money lenders for ready cash even though they are at a higher rate of interest. Sometimes when they fail to pay off the monthly installments, these payments get accumulated into a larger sum of money and the individual fall into what can be called as a debt trap.
How many types of debt are there?
There are basically 3 types of debt.
1) Secured and unsecured debt: A debt is known as a secured debt when a money lender or a creditor has hand over the assets of a borrower if the borrower fails to pay the installments. In an unsecured debt, the creditor has no means to fall back on the assets of the borrower to fulfill their claims.
2) Private and public debt: A private debt occurs when there is a failure to repay the loan when one has borrowed from a private institution. While in a public debt, money is borrowed from a public institution.
3) Syndicated debt: A syndicate loan is a loan when a borrower is a company that requires a huge some of money, mostly in millions of dollars.
Now that the types of debts that can take place has been clearly stated. Let's have a look at the debt relief options. An individual or company at debt need not worry. There are ways and means of getting rid of it. One of the easiest way is Consumer Credit Counseling is a process where organizations negotiate between the individual at debt and the creditor. These balance out a minimum monthly payment so that it is easy for the borrower to clear off the debt. While deciding upon the consumer credit organizations, it is important to check whether the host is a profit or a non profit organization. Non profit organizations are funded by credit card companies. So understanding whether the company is collecting the fees from the borrower and compensation from the creditors is significant.
There is yet another method that one can avail. This is known as the Debt Consolidation Loan. In this a debt management company negotiates with the borrower and the creditor to come to a reasonable lower monthly payment. The borrower has to pay a single payment rather than multiple bills. The interest rate is lower and the borrower escapes from the clutches of the collection agencies.
An individual can also declare oneself as bankruptcy. One has to be able to justify the reasons behind bankruptcy and convince the bank of the capability of repayment within a stipulated time period. Although this has an impact on the credit report many people still opt for it and are not aware of better settlements.