It takes more than just getting out of debt to enjoy freedom from creditors. Creditors also are not a good way to get out of debt because they often file liens and wage garnishments against you. This makes paying off your debt even more difficult. You must pay your debt within a specified period of time in order to be rid of debt. Once you have paid off your debt, you will need to find a way to get yourself out of debt without having to worry about creditor liens and wage garnishments.
Debts are usually obligations that require one party, your debtor, to pay cash or some other agreed upon amount to another party, your creditor. Debt is simply a deferred payment, or succession of payments, that differentiates it from a single purchase. In most cases, debt can be classified as any obligation owed to a person or business. In this case, debts would include credit cards, medical bills, store accounts, car loans, gas cards, etc.
Debt can also be divided into unsecured debt, personal debt, secured debt, and mortgages. With personal debt, it could include things like mortgages, student loans, and credit cards that haven’t been consolidated. Unsecured debt does not include things such as personal loans, gas cards, store cards, car notes, etc. Secured debt, on the other hand, is the debt that is owed to a lender by one person against collateral. This can include car notes, home loans, and auto loans.
There are two primary types of secured debt: mortgages and car notes. Mortgages are for homeowners. Car notes are for consumers. When securing a mortgage, the lender requires you to use collateral in the form of a house or car. If you don’t own anything valuable, this is an ideal situation. However, with both kinds of debt, most people won’t be able to secure enough collateral to actually make the loan amount affordable.
To complicate matters even more, there are many different types of debt. Some examples of unsecured debt are credit cards, gas cards, department store cards, etc. When you add up all of these types of unsecured debt, you will probably be shocked at how many times you are spending more on unsecured debt than on secured debt. This makes debt consolidation nearly impossible because you are simply adding up all of your debt and multiplying it by thirty-fold.
With secured debt, however, you have a great asset which you can use as collateral if you want to make the loan. Most lenders are very willing to help people consolidate secured debt, especially since the asset (the house or car) is likely to stay in their homes for the long term. While this may not be possible for most borrowers, this asset does increase the borrowers’ bargaining power when it comes to getting a loan. Remember, your collateral is your home or car, which means that if you cannot make your payments the lender could sell your assets to recover his losses.