Is my age a factor in reducing the debt? Yes, being in my late twenties I have many working years ahead of me.

Could the debt be paid off in a reasonable time frame? Not on my teacher's salary.

Under the current income how long will it take to reduce the debt? I estimated a good ten years.

Answering these questions proved to be painful but very necessary. The answers helped point me in the right direction as I reviewed debt consolidation, debt settlement, and various loan programs.

My Journey To Getting Out of Debt

I found the terms debt consolidation and debt settlement confusing, but realized it was imperative that I understand the difference between these two terms.

1. What is the difference between debt consolidation and debt settlement?

A debt consolidation loan is essentially borrowing money to pay off debt, in the process a new debt is incurred. The rationale is that by consolidating all debt into one loan, it's less stressful than paying a lot of creditors. The way it works is you borrow enough money from one lender to pay off all of yours creditors. On a monthly basis under this kind of arrangement you make one payment to the lender.

Solving current debt with another debt is a warning sign to creditors, that a person is spending beyond their means. Debt consolidation is not the route I chose to take. My research shows it's not a good course of action unless it:

• Eliminate existing debt
• Decrease monthly credit card payments
• Lowers interest rate on debt
• Results in one monthly payment
• What I found alarming about debt consolidation is that some companies advertise "lower your payment by 50%."

  These ads are misleading. Debt consolidation companies are in business to make money off of someone else's financial woes. They talk about utilizing hardship programs which the major creditors have for "reduced payments" and "lower interest". Unfortunately, these so called hardship programs which supposedly offer payment reduction no longer exist.

• 1. I found out the way to reduce payment is to contract with an accountant or an attorney who can negotiate with the creditors for a reduced payment also known as debt settlement.

  The debt consolidation industry has earned a bad reputation by misleading people into believing they will get a low interest loan and that they will reduce payment. The service these firms do provide are loans to help pay off a debt, which I'll go into later in this article.

• 2. What happens in a debt settlement program?

• A. An accountant or an attorney puts together a program to reduce payment and settle debt. (The debt settlement program my accountant arranged for me required that I pay the student loan and the credit card debt at $.30 cents on the dollar. )

• B. When the debt is settled a full and final release is issued from the lending institution and the credit card company. After receiving these release letters I sent a copy to the credit unions: Equifax, Tran union, and TRW, so the debt would appear as settled. I learned that credit managers view debt settlement in a positive light, it shows good integrity.

• 3. What other ways are there to get out of debt?

  Short of winning the lottery or inheriting money the main option for getting out of debt is to obtain a loan. To prepare for the loan process it's a good idea to find out if you have a good or bad credit rating. If you have good credit consider a debt consolidation loan. Don't be discouraged if you have poor credit there are lenders willing to work with you, but the interest rate will be higher.

Here is a very helpful site offering information increasing your financial literacy

Richdad.com

Don't go online and fill out ten loan applications. You'll wind up with ten alerts on your credit report. It is better to fill out only 2-3 loan applications.

4. What are some resources for bringing greater peace of mind to finances?

Now that I've settled my debt I feel so much more in control of my finances. I sleep better at night and my ulcer's not bugging me as much. I still worry about my financial future with a limited income as a teacher I think that's only natural. What I've started to do are find ways to bring financial security into my life. Here are some things I'm doing to give me greater peace of mind.

• A. Utilize a credit monitoring service. This kind of service guards against identity theft by keeping close tabs on your credit card. At this website they have a good comparison chart. http://www.fightidentitytheft.com/credit- monitoring.html For example, Equifax offers identify theft insurance up to $20,000 and provides email security alerts. This is a good value.

• B. Knowledge is power. I'm reading the book Rich Dad Poor Dad by Robert T. Kiyosaki. As Kiyosaki says, "Take responsibility for your finances or take orders all your life. You're either a master of money or a slave to it." These words I've taken to heart.

• This book is inspiring me to learn more about investing. At first just thinking about investments on a teacher's salary sounded foolish. Now I realize not thinking about investments is the foolish thinking.

Like I tell my students, the only limits to the mind are the limits we put there. If you believe in something strong enough you'll make it happen.

Copyright Rene Tse has been writing about personal finance for more than 5 years. Rene has been helping people understand how to get the best financing rates when applying for a loan to start a small home based business. Choosing the right free credit report service tips included.

I grant permission to publish this article, electronically or in print, as long as the bylines are included, with a live link, and the article is not changed in any way.