Debt Settlement Provides an Alternative to Home Equity Loans

Americans have about $2.5 billion in total debt, according to the Federal Reserve's Consumer Credit report released on Oct. 5, 2007. That averages to more than $8,000 of debt per person in America. It is not surprising, then, that consumers are searching for ways to repay their credit card debt. Many people have used home equity loans for debt relief, but the downfall of the housing market has negated the benefits of those loans. However, debt settlement is a debt-relief method that can provide assistance to consumers overwhelmed by credit card debt.

Home Equity Loans for Debt Relief

The housing market has affected the practice of home equity loans as a means of debt consolidation because home values have decreased while interest rates have increased. The less equity a consumer has in their home, the less money they can borrow to repay their credit card debt.

Before the housing market bubble busted, some lenders allowed homeowners to borrow over 100 percent of the market value for their home or obtain loans even if there was no equity in the home. This option provided consumers a chance to use the acquired funds to repay credit card debt, take a vacation, invest or just spend that money.

However, with foreclosures at a record high, the danger of default is much greater and thus, lenders have enacted more stringent requirements for home equity loans and increased interest rates to account for the risk. Many consumers hoping to use their home's equity to repay credit card debt must now seek other debt relief alternatives.

Debt Settlement

Debt settlement is an alternative to debt consolidation loans that can does not require you to use your home's equity or borrow money to provide debt relief. Instead of using an asset, like a home, as collateral to receive a loan, debt settlement works with creditors to agree upon a repayment amount. This program can turn missed payments into leverage to reduce your credit card debt balance.

If you have failed to pay your monthly credit card bills or you are near default, then debt settlement is your best option to eliminate that debt. Debt affects millions of Americans, but you don't have to be another statistic. Choosing to be debt free is one of the wisest financial decisions you will ever make.

Author Bio: Scott Sumerford has several years of experience working in the financial industry and has written a myriad of articles on various financial matters. He graduated from the University of Texas at Arlington where he worked as a writing center tutor and contributed to the university's newspaper, The Shorthorn. View more articles

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