I was having my back “adjusted” the other day when the young man who was “manipulating” my back muscles asked me what I did for a living. I told him we help people who have unsecured debt. He replied,” What’s that?” I then asked him how old he was, and replied; “26.” Okay, I thought, this young man is going to learn a little bit more about debt today.
In a nutshell, unsecured debt is debt that is not secured by anything. For example, credit card debt, medical bills, personal loans, etc. More on that in a minute. This is just the opposite of secured debt. Secured debt is “secured” by the asset itself. A few examples of secured debt would be your home or your automobile loan. Therefore, if you do not make the monthly payments on secured debt the bank can take that asset away from you. If you do not make the monthly payments on your home, the bank can foreclose on your house. If you do not make your automobile payments over a period of a few months, the bank can come and repossess the vehicle…and have for many people.
So there are two types of debt: secured and unsecured.
Unsecured debt is just the opposite of secured debt. With unsecured debt, if you cannot make the payments on this type of debt, the bank cannot come and take anything away from you. Therefore, credit cards, medical bills, personal loans, notes from reposed vehicles are all considered unsecured.
As a result, because the banks cannot “take anything from you” on unsecure debt, it then becomes negotiable. This is the type of debt that give the debt settlement companies the leverage to come in and negotiate a settlement for you, most times for a fraction of what you owe.
Why would a bank do this? To begin with, they do not want you to file for bankruptcy. If you filed for bankruptcy, the bank would get nothing. They would much rather get “something” rather than “nothing.” In addition, most banks know that they have already made a lot of money from you already. Every time you used your credit card, the retailer has to pay the credit card company a fee (usually 2% -4%) on whatever it is you are purchasing. That is why you see so many rewards programs for credit card debts. If Visa or MasterCard make 3.5% every time every person or company uses its credit cards, and they give you back 2%, they are still making 1.5% on every transaction you and everyone else makes that day. So they make millions every day, just on this “processing fee.” By the way, this “fee” is filtered into the retail price of what you are paying for those items. In addition, with all the interest that have charged to you over the years, these creditors know that not all of what you owe them is principal. Finally, banks will negotiate because from bookkeeping prospective, it is better to able to “account for something than nothing.”
To learn more about how a Christian debt settlement company, such as Nationwide Debt Reduction, Inc. can help you get out of debt, please call our toll free number at 800-890-6658. We are located in the Phoenix metropolitan area, and on PST. Our hours of operation are 1-800-890-6658.