Debt Management Tips, Tools & Advice

Yes. There are three general types of credit:

Revolving credit - Where you borrow money up to your credit limit and pay it back in one lump sum or make minimum monthly payments with interest, e.g., Visa and MasterCard.

Charge credit - Where you borrow money up to your credit limit and are not able to make partial payments. With charge credit, you are required to pay back the full amount at the end of the month.

Installment credit - Granted to you to make a one-time purchase. You pay back your debt within a predetermined period of time at a specified interest rate, e.g., mortgage payment.

Using a balance transfer to manage debt may be a good idea, or it may be a terrible idea -  it really depends on your situation. Balance transfers are an easy way to combine all your credit card debts into one, but you have to be careful with them. Usually they come with fees and costs and even if they have a teaser introductory rate that lowers your interest costs and payments, those introductory interest rates can jump significantly after 6 months to a year. If you opt for a balance transfer, make sure that you look into the fees, interest costs and make the decision based on the true lifetime cost of the new account.  Also, be 100% certain NOT to run up your old cards!

Although you can file bankruptcy paperwork yourself, hiring a bankruptcy attorney is typically a better option. Filing for bankruptcy is complicated and often confusing. By hiring a professional, you ensure that the correct paperwork is filed and that the process will go smoothly.  Also, to qualify for a chapter 7 liquidation bankruptcy, you will need to complete court approved credit counseling course work, which can be managed and explained by your bankruptcy attorney. Learn more at the Bills.com bankruptcy portal.

First, make sure that a debt consolidation service is what you need. Do you own your home and have equity? If so, maybe a debt consolidation loan or refinance would be right for you. Evaluate your priorities: is a low monthly payment the most important factor? If so, debt settlement might be your best option. Afraid of collection calls or your credit score impact? In that situation, credit counseling could be your optimal debt consolidation service. And finally, you need to research the debt consolidation service at various consumer protection offices, including the Better Business Bureau (BBB). This will give you an idea how honest and reliable their services really are. Fortunately, Bills.com has evaluated many debt consolidation services providers and can match you with a pre-approved provider, if you apply though the savings center above.

Debt consolidation can help you consolidate credit cards into one new program with one payment, with a consolidation loan, or by using a consolidation service that acts as your representative with the creditors to pay off debt faster and for a lower cost.  The typical benefits of a debt consolidation program vary between these primary benefits:  i) lower monthly payment, ii) lower interest rate, iii) reduced debt, iv) shorter time to debt freedom, and v) convenience.  Each type of debt consolidation program varies and offers a sub-set of these benefits, so use Bills.com and do your homework!

Usually done in consultation with a counselor or loan officer, a consumer consolidates all of his or her debts into one loan or one repayment plan.  Now, varying benefits and features of different debt consolidation type programs exist, so understand how all debt consolidation programs work, including refinance loans, credit counseling, debt settlement and debt consolidation.

Debt consolidation loans typically have a minimal effect on your credit. In most cases, you apply for a home refinance or debt consolidation loan and use the proceeds to pay your other debts. Although you will now have a single larger debt on your credit report, several small debts will be eliminated, lowering the credit utilization of those accounts. Other forms of debt consolidation services, including debt settlement or credit counseling will hurt your credit rating for the life of the debt resolution program, and potentially even longer.

State of insolvency of an individual, business, or organization. Bankruptcy is a legal term for a process that is supervised by the bankruptcy court. The court determines eligibility for bankruptcy and what kind of bankruptcy will apply.

Reorganization bankruptcy. Chapter 11 is commonly used by businesses.

Chapter 13 is a reorganization bankruptcy for individuals. In Chapter 13, the court orders a repayment plan, restructuring the individual's debts to repay the creditors over time, sometimes at a reduced rate.

Liquidation bankruptcy. Under chapter 7, assets are sold and the proceeds are used to pay debts. This chapter is also for people without assets.

A company hired by a creditor to collect a debt that it is owed.

Debt consolidation can mean a loan, sometimes a refinance loan, that combines several debts into one new account with a lower interest rate and lower payments. 'Debt consolidation' is sometimes used to refer to credit counseling or debt settlement. Since the various options can be confusing, check out the consolidate debt page at Bills.com for more info.

Organizations that help consumers find debt solutions. Options often include debt management plans. Most are nonprofit organizations that are actually funded by creditors.

A third-party managed debt payoff strategy where your interest rates are lowered and your monthly payments decline. A credit counseling program typically takes around five years to get debt free. Each consumer's experience depends on his or her creditors.

Any person or organization to whom the debtor owes money or has a legal obligation.

Taking multiple debt or credit lines and consolidating them into one new payoff plan. Frequently, this is a consolidation loan, provided to consolidate debts into one loan with one payment, typically shifting credit card debts to secured debt by refinancing a mortgage. 'Debt consolidation' is sometimes used to refer to a credit counseling or debt settlement program.

A loan used to payoff multiple accounts of personal debt. A debt consolidation loan rolls pre-existing debt into one loan with a single monthly payment.  Debt consolidation loans often are taken out to combine several higher interest debts into one lower interest loan.

A service provided by an agency that provides debt help services, including credit counseling, debt settlement, and debt consolidation loans. Most people refer to a Debt Management Plan as a plan administered by a credit counseling firm.

Debt Negotiation is a program for reducing consumer debt to the lowest level, typically with a low monthly payment, while avoiding bankruptcy.

Debt relief means seeking help and aid in resolving debts, including debt consolidation loans, credit counseling, loan modification, forebearance, debt settlement, or even bankruptcy.

Debt settlement, also called debt negotiation, is a process by which creditors (the lenders) agree to forgive a part of a balance, saving the debtor (the borrower) up to 50%+ of what was owed. The debtor must pay the new agreed-upon sum only and no more. In some cases, the debtor may continue to make monthly payments until the newly agreed balance is paid. In others, the debtor must make a lump-sum payment. The forgiven balance MAY be considered taxable income by the IRS and MAY be noted on a form 1099-C. Check with a tax advisor. The settlement may also be noted on the debtor's credit report.

DTI is a formula that compares certain debts you have to your gross income. DTI can be viewed as a 'front-end' or 'back-end' ratio. The front end ratio divides your gross income by the total of your mortgage payment, property taxes, and homeowner's insurance. The 'back-end' ratio additionally accounts for debts like car payments, credit card debts, and court-ordered child support or alimony obligations. DTI is expressed as a percentage, the percentage of your gross income that the debts utilize.

Regarding a home or property, equity is the difference between the fair market value of the home or property and the outstanding balance(s) on your mortgage(s). Regarding  your vehicle, equity is the difference between the trade-in or market value of your vehicle and the loan payoff amount.

Your FICO score is a mathematical equation/calculation that lenders use to evaluate the risk associated with lending you money. FICO stands for Fair Isaac Company, the company that created the formula originally.

A revolving account is an account issued with a maximum credit limit that does not have to be paid in full every month. The borrower usually is required to make a minimum monthly payment that is based on the  size of the balance. Most credit cards are examples of revolving accounts.

Revolving debt is consumer debt that is owed on an account that can be used repeatedly and is repaid in part or in whole, without the need to reapply for credit.

A method of repaying debt where all minimum debt obligations are met and any surplus funds are devoted to paying off the highest interest rate debt. After the highest interest rate debt is paid, all surplus funds are directed to the next highest interest rate debt, until all debts are paid off.

An unsecured loan is also called a personal loan or signature loan. It requires no collateral. Unsecured loans usually have higher interest rates than secured loans.