To talk about different debt settlement strategies we should first of all define what it is.
The term debt settlement or debt consolidation is used to define a financial operation, during which a person combines all of his various financial liabilities into one loan. Such strategy helps the consumer to better manage his or her debt problems. Rather than paying off several separate bills each month, a consumer consolidates his or her debts with a financial institution that will arrange for one lower monthly payment extending over a period of time.
Sometimes you need to take a new loan to pay off your debt or to use the existing one, usually at a lower interest rate. However this is not the only possible way out. Debt relief can also be achieved in some other ways including:
1.a re-mortgage
Changing from one mortgage to another, either by switching lenders, or by taking out a second mortgage to draw on the equity that may have been gained by the rise in capital value of the property.
2.an Individual Voluntary Arrangement (IVA)
The debtor makes a voluntary arrangement with their creditors through the law courts for the settlements of debts.
3. a bankruptcy
A legal procedure by which an insolvent debtor can be relieved of repayment of certain obligations. Bankruptcy stays on the borrower's credit history for up to 10 years.
As we can see from the above there are several options for a debtor who is trapped into the debt and who would like to find an opportunity for debt relief. Some more accurate steps on debt settlement and consolidation will be covered in part 2.