Pros & Cons of Popular Debt Solutions.

Today consumers have several options for resolving outstanding unsecured debts. There is plenty of press proving the positive of one method or the negative of another, but I have yet to find an unbiased informative piece that shows both pro and con of each vessel. Consumer options range from a Consolidation Loan, CCCS, Bankruptcy, or Debt Settlement and are all useful and viable dependent upon the consumers' needs and situation.

Consolidation Loans are an option for consumers who have maintained good credit history and can be taken out to pay off credit cards and make one payment to a finance company. While some may see this as robbing Peter to pay Paul, it can be very helpful for those driven to get rid of debt and cut interest while not sacrificing their credit score. On the downside, it is very easy to get in much further if a consumer falls back into the rut of using their credit cards.

Most people that are looking for help with their debts will not fit into a consolidation loan because their debt to income ratio or previous payment history does not fit into conventional lending guidelines. When consumers are looking for help, it is usually past the point of loans for redemption.

CCCS is pushed by the credit card companies as "non-profit" and the preferred method of assisting consumers. CCCS programs run 7-10 years much like a bankruptcy and often have a higher monthly payment than your normal minimums. CCCS companies negotiate your interest rates down, you make one payment to them for your minimums plus their $75 "donation" or "maintenance" fee. One thing to keep in mind is that a CCCS shows on your credit report as a third party much like a bankruptcy. If a consumer can easily afford their minimums and does not mind the third party mark, this is a good way to go. It effectively eliminates your debt sooner than paying the minimums and does not allow for consumers to continue spending and get further in. CCCS companies receive kickbacks from the banks for their work in collecting the full balances. On the down side, CCCS companies ultimately work for the bank and not the consumer and banks are reporting only a 13% success rate.

Debt settlement is the quickest way to resolve unsecured debts without bankruptcy or a loan. Consumers hire a debt settlement or debt negotiation firm to assist them in saving money and reducing the balances owed by paying less than the full balance. Monthly savings and fee payments are less than normal minimums and ease household cash flow for consumers. The debt settlement process is normally completed in 18-36 months with all consumer accounts being settled at an average of 40-45% of the debts owed. While some banks are put off by debt settlement, it is an emerging and growing industry that the banks are recognizing and working to help improve relationships. Consumers have to weight the positive and negative here. Debt settlement is the fastest and most cost effective manner to eliminate debt, however it does come at a price and risk. Consumers put off their payments to creditors in order to save for settlement which reflects a poor pay history, but as accounts are settled, consumer debt to income ratio goes down which improves credit scoring. With no payments being made consumers are open for suit by the creditors. They still have a legal right to collect the monies owed.

Bankruptcy is the last option for consumers and with the obvious stigma surrounding it and the changing of laws in 2005 is it the least desirable. While it does structure the repayment of your debts for less than full balance like debt settlement and take 7-10 years like CCCS it has the most impact on your credit while granting you the most protection. Always seek counsel for a bankruptcy and research the attorney you choose to make sure they have your best interests in mind.

There are several other places to look for information about your options, I would suggest you speak with a representative from both a CCCS and debt settlement agency when making your decision. Debt settlement is a relatively open industry and buyer beware when choosing which company to use. You can visit www.tascsite.org for a list of settlement companies that have set standards of operation and are reputable companies driven to assist consumers.