The Debt Dictionary: Important Terms to Know
There are plenty of terms tossed around when you hear companies talk about debt. It can be difficult to decipher them when trying to figure out the right financial solution for you. New Era Debt Solutions is going to give you our definitions for important debt terms that you need to know more about.
Debt reduction. This is an umbrella term for different types of debt relief. It’s as simple as it sounds – it helps you reduce your debt. These are your choices:
- Making minimum monthly payments
- Credit counseling
- Debt consolidation
- Debt settlement
- Bankruptcy
Debt settlement. Negotiation is used to get debt owners to agree to pay back a portion of the debt that is lower than the total debt cost. The creditor forgives a portion of the balance in a transaction known as “settlement.” You save money with this debt reduction option and it tends to be quicker than other avenues for achieving financial stability. New Era specializes in debt settlement – we’ve been in the business since 1999 with over $275,000,000 debt settled!
Debt consolidation. This method of debt reduction requires that you take out a larger, low-interest loan to pay off multiple higher-interest unsecured loans. Consolidation usually allows you to make a monthly payment lower than the amount you were originally paying on your numerous credit cards and unsecured loans.
Credit counseling. A type of debt management program where you make one monthly payment to a credit counseling agency. It’s the agency’s job to then distribute the money to your creditors on your behalf. It’s usually done at a lower interest rate to help you pay off debt more quickly, but there are no guarantees. This debt relief option helps you pay back all your debt including any interest, but it will take 5 to 7 years to complete. Credit counseling programs have very low completion rates compared to other debt reduction options.
Bankruptcy. You file for bankruptcy when you cannot pay off debts from your current assets. A formal declaration of bankruptcy halts the credit collection process and the debtor no longer owes some, or all, of the unsecured debt. This offers a temporary sense of relief and should be your last option.
Long-term debt. Debt is considered long-term when you’ve had loans and other financial obligations for at least one year. Long-term debt usually applies to businesses or governments. There are a few things you should know about your business and debt. One being that you shouldn’t run your business on credit cards. Credit cards are a short-term solution and could easily put your business in long-term debt if you make poor financial decisions.
Are there other debt terms you want to know more about? Share them on our Facebook page so we can explain.
Get a free debt analysis on our website and contact New Era Debt Solutions so you can start living debt free today. We offer people-friendly debt relief services and want you to be our next success story. Call us today at (800) 527-4421.