Remedies For Unsecured Creditors - Advice On How To Eliminate Unsecured Debt

While it is of course true that no debt is good debt, unsecured debts are distinctly preferable because there are more options open to you when it comes to getting rid of them. Finding remedies for unsecured creditors is not difficult, because there are two very well established approaches to dealing with serious amounts of unsecured debt.

Let us first be clear about what unsecured creditors are. These include credit card companies, stores that give you credit, banks that extend you an overdraft facility and any other company that lends you money or extends you credit without tying the debt into something of value that you own. Mortgage lenders are not unsecured creditors because that type of lending is secured against your house, meaning they can have it sold to reclaim their money if you default.

The two most successful and widely used remedies for solving debt to unsecured creditors are debt management plans and debt settlement. Debt management is also known as debt consolidation and takes the form of a structured payment plan which consolidates all your debts into a single payment. Debt settlement, on the other had, involves reaching negotiated settlements with your creditors to get significant reductions on the principle amount that you owe.

Of these two remedies, debt management plans are the most common, and are used for fairly significant amounts of debt to two or more different unsecured creditors. A debt management company will work on your behalf to secure new agreements with your creditors to lower the cost of repaying your debt. This will normally mean getting lower interest rates and even writing off any penalty charges. The result is that instead of making lots of payments to different creditors you just make a single payment of a lower amount to the debt company.

If you use debt management you eventually repay everything you owe to the unsecured creditors that you were in debt to, whereas with debt settlement you only repay a fraction of it. This is because it is for dealing with more serious situations, where you perhaps could not afford the monthly payment amounts of a debt management plan.

Under a debt settlement program a negotiator from the debt company would strike deals with all your unsecured creditors to settle your debts for a proportion of the original amount, in exchange for prompt payment of the agreed settlement figure. Instead of paying anything to your creditors while this is going on, you make regular payments into a separate pot instead, which is eventually used to make the settlement payments.

Debt management plans are widely available in both the US and the UK, but debt settlement is really only found in the US. For UK residents with serious debt problems, the solution is probably what is known as an IVA, which means an individual voluntary arrangement. This is similar to debt settlement because it also results in a fixed monthly payment and getting a lot of your unsecured debts written off. Knowing which of these remedies for unsecured creditors is going to be most appropriate for you can be difficult without expert advice. Your starting point should be to find a good debt company that will examine your circumstances in detail and give you honest and unbiased advice on which option will work best for you.

You do need to avoid just going with the first debt company you come across though, as they are by no means all the same. You can ensure you rule out any unproven companies by following well researched recommendations for the best debt management and debt settlement companies. If you can find a few that you know have been in business for years with plenty of happy customers, you can then apply to a few different ones to see what they can offer you. As with anything other service or product, you can get better value by comparing a few.