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When I was young with a wife and 2 small children I managed to get myself into some serious debt. It's not that I was a big spender or that I was stupid, it's just that I wasn't making as much money as it was costing us to live. That was back in the so-called “good old days” when the husband worked and the wife stays home. We had only one income and it just wasn't enough to cover our normal living expenses. We got so far in debt that I had to go to one of those companies that specializes in debt relief loans. I was a college graduate with a decent job and it was just very embarrassing to have to go and basically plead for a loan.
Things are different now. It's not as embarrassing to check out debt relief loans because almost every family is now in debt. I have seen reports that the average American household now carries about $19,000 in debt if you can imagine that. Plus, you can now get debt relief loans online and not have to face that stern looking loan officer who needs to know every detail of your financial life.
Secured and unsecured debt relief loans
Debt relief loans fall into two categories–secured and unsecured. A secured loan is one where you put up an asset as collateral for the loan. This could be a boat, your second home or your house. The important thing is that you have to have more equity in it then you are asking to borrow. For example, if you need to borrow $20,000 for debt relief, you would need to put up an asset where you had at least $20,000 in equity. If yours were the average American family, this would most likely be your home. If you fail to make your payments on a loan secured by your home, your lender could actually force you to sell it.
No collateral but …
The advantage an unsecured debt relief loan is that it requires no collateral. However, you will most likely have to pay a much higher interest rate because the lender is taking more risk. If you should fail to make payments on their unsecured loan, the most the lender can do is harass you for payment or turn the debt over to a collection agency. In addition, unsecured debt relief loans often come with high upfront fees because again, the lender is taking more risk and needs more money to offset it.
The best debt relief loans
It is probably better to apply for a secured loan because you will have a much better interest rate and can pay off the debt faster. As a rule, the best debt relief loans are a homeowner line of credit or a second mortgage. Your bank or credit union can probably help you with one of these loans. Be sure that you read the loan papers carefully so that you will understand exactly what you're getting into. There will probably be loan origination fees and it's important you know what they will be. It’s also important to remember that you're not reducing your debt. You're just moving it from one lender or set of lenders to another. You will have more time to pay off the loan but you'll be paying off the same amount of money, plus whatever interest you’re charged.
Debt relief versus debt relief loans
One alternative to a debt relief loan is called debt relief or debt settlement. The company National Debt Relief has done debt settlement for many Americans. This consists of negotiating a settlement plan with the credit card companies that can reduce your debt by 50% or more. Cutting your debt by 50% usually means reducing your monthly payments accordingly, which allows you to pay off your debt much faster. In fact, National Debt Relief (( ) says it can probably negotiate a settlement plan that will get you completely out of debt in 24 to 48 months.