What is the Best Way to Manage Consumer Debt

Consumer debt world wide is a very serious problem, one that has cost millions of people their homes, cars, boats, motorcycles, and worst of all, good credit.  Before we get into the best way to manage consumer debt, we wanted to provide some important statistics to help you and other readers understand the vast depth of this problem.  For example, according to the Federal Reserve, more than $2.5 trillion accounts for current consumer debt.

Consumer debt world wide is a very serious problem, one that has cost millions of people their homes, cars, boats, motorcycles, and worst of all, good credit.  Before we get into the best way to manage consumer debt, we wanted to provide some important statistics to help you and other readers understand the vast depth of this problem.  For example, according to the Federal Reserve, more than $2.5 trillion accounts for current consumer debt.

For total consumer debt, credit cards account for 36% while loans account for the remaining 64%.  While home loans are a major problem, automobile loans have quickly become another serious issue.  For instance, the average American will only have a down payment of 9%.  This means that 91% of the car would be financed.  Considering the average car costs more than $30,000, the amount of money involved for car loans is significant.

Of course, credit card debt is by far the most challenging problem when it comes to consumer debt.  Considering that more than 181 people in the United States have at least one credit card, which equates to 1.5 billion cards, and that total annual purchases using a credit card is close to $2 billion, it is easy to understand that for anyone interested in managing consumer debt, credit cards need extra attention.

If you are tired of being in debt and desperately want to get out from under financial burden, it is imperative that you learn about different strategies for managing your personal finances more efficiently.  The good news is that because of the high level of consumer debt, you have a number of viable solutions.  Many options have been developed by the government specifically to help Americans gain better control over finances so they can enjoy life but without being smothered by debt.

For starters, if you are only slightly past due on bills, we strongly recommend that you contact each creditor involved and see if some type of plan could be devised.  Typically, creditors are more than willing to work with creditors since it is beneficial to them as well.  For instance, if you own a home and are now behind on the mortgage loan, you can be assured that the lender would much rather work out a deal to get monthly payments from you than to have the property come back to them.  If the property were to go into foreclosure, not only would the lender receive no payments for a certain amount of time but also, they would likely take a loss once the property sells.

Therefore, before you do anything drastic, talk to your creditors.  Explain to them the situation you are in, why you have found yourself in the situation, and what you could do to work toward a solution financially.  The most important thing is to be 100% honest with your creditors and once you make a payment arrangement do everything possible to stick to it.  Even then, if you were to find the new arrangement is too much for you to afford, contact them again to see if it could be modified.

Whether you work with the creditors or not, one of the best ways to handle consumer debt is by devising a debt relief plan.  For this, you could develop a plan on your own using some type of financial software or work with a professional.  If you decide to seek assistance, you want to be very careful in the company you choose.  For instance, a few debt counseling companies exist that are honest and legitimate but most are extremely controversial.  The reason is that these companies make exaggerated promises to clean up your credit when in fact they can accomplish only a very small portion of the promises made.

You could contact a financial counselor with one of the top financial companies such as H&R Block.  A representative would work closely with you to develop a plan that would help you get out of debt.  Your debt to income ratio would be reviewed so a workable budget could be developed.  Regardless of the debt relief plan used, be prepared to put in time and effort to the process.  In return, you would have the opportunity to gain control of debt and enjoy financial freedom.

As a last resort, you may find that bankruptcy is the only option.  Because bankruptcy laws have changed, now stricter than ever, it would be essential to work with a bankruptcy attorney or advisor.  This person would guide you through the process and be available to answer questions according to the law.  Although bankruptcy should always be considered as a last resort, it is helpful to know it is available if needed.