When people talk about debt reduction, they are basically talking about debt management. Most people who are having financial difficulties need more than simple debt management. They need a reduction in their debt that will result in debt elimination.

Reducing debt is a good thing. The basis process of debt reduction starts with eliminating your credit card debts that have the highest interest rate and carry the highest balances.

If you have a steady income and you are currently capable of paying more than the minimum amount due each month, you can reduce your debt by simply paying a little more on your monthly payments and by prioritizing your debts.

Debt reduction can be accomplished but for many people, it can be a very slow process. If you have made it to this page then you might be in the category of people who need a little more than simple debt reduction. Don't worry, you do have options!

Beyond Debt Reduction

In some cases, simple debt reduction may be a little to little, a little too late. The process of debt reduction may be a little too mild for your particular circumstances.

Some of the options that you may have considered could include a debt consolidation loan, bankruptcy or debt settlement. For the purpose of this article, we will not bother with bankruptcy. There is plenty of information on the internet if you want to take a serious look at your bankruptcy options.

In short, bankruptcy is best avoided whenever possible. A better choice may be debt negotiation. For some people, debt consolidation may be a viable solution to their debts.

Just make sure that you don't jump right into any one of the various debt solutions without first doing plenty of research. You will want to take a close look at debt settlement and debt consolidation.

Debt settlement is like debt reduction on steroids. Where debt reduction attempts to reduce your debts, debt settlement is a way of completely eliminating your unsecured debts.

The best news about debt settlement is that you probably won't even notice that you are paying for it. You will have to make a monthly payment but your new payment will be less than the combined total of your previous payments to your creditors.

Debt settlement cannot really be put into the same category as debt reduction. It's actually called debt negotiation. The reason for this is that the process is really about negotiating your debts.

A debt settlement company will contact your creditors and negotiate your debts. They can usually get your debts reduced to a mere fraction of their previous amount. The debt settlement companies make their money by taking a portion of the difference.

Here is an example of debt reduction through debt settlement. Let's say you have $20,000 in credit card debt. Your minimum monthly payment on these credit cards adds up to $500.

A debt settlement company may take on your case and offer to have you pay them only $300 per month. Keep in mind that previously, by paying $500 per month, you were only paying the minimum amount do. This would make it impossible for you to ever achieve a reduction in your debt.

Now you can pay $300 per month to the debt settlement company and also get ahead at the same time. They will initiate an agreement with you that states how much you will pay them per month and how long it will take to completely eliminate your credit card debt.

How can they do this? The debt settlement companies can negotiate your debts down to a fraction of their previous value. In the example above, they may get that minimum combined payment down to $150 instead of $500 per month. Now you're paying the debt negotiation company $300 per month but they only have to pay your creditors $150 per month.

Of course, they will pay more than the minimum $150 per month to your creditors. They have a scientific formula that will allow them to make payments to your creditors in such a fashion that will allow for the elimination of your debts in the prescribed amount of time.

They may actually pay $250 per month, take your $300 per month, and then keep the difference as their fee.

The bottom line with debt settlement is that you get much more than a simple reduction of your debts. Your monthly payment is usually much less than the previous amount and you gain a scientific approach to paying off your debts.

A debt consolidation loan is another method of debt reduction. With this method, you actually get an additional loan to pay off your other unsecured loans and credit cards.

Your consolidation loan can either be secured or unsecured. A secured debt reduction loan is when you borrow money with some type of collateral, such as your home.

You can get a home equity loan at a relatively low interest rate. Most credit cards come with fairly high interest rates. Using the example above, you could get a $20,000 home equity loan and then use the money for debt reduction. You can simply pay off your credit card debts and other types of unsecured personal debts.

The goal with a debt reduction loan is to end up with a lower monthly payment than you had previously. This is accomplished with the lower interest rate that you can get with home equity loans.

The downside to this type of loan is that you are risking the home that you live in. An additional downside is the fact that you may not even own a home or if you do, you may not have enough equity in your home to qualify for a loan.

For people who don't own a home, or for those who simply don't want to take on the risks that are associated with home equity loans, there is the personal debt reduction loan.

You can apply for a personal debt reduction loan and hope that you can get a low enough interest rate to make it worth your while.

The main problem with personal loans is that they can be difficult to actually qualify for. If you already have a heavy debt load, it may be difficult to find a lender who will give you an additional loan.

To sum up the entire debt reduction process, you have a choice between debt settlement, consolidation loans or bankruptcy. The best thing to do is get some good counseling and to also do a considerable amount of research on your own so that you are fully aware of all your options.