You’ve read about debt consolidation? It’s likely that you have, but maybe you don’t understand its benefits. If you have bills that you cannot manage, a debt consolidation may be just what you need. Picking your plan wisely is the key. Continue reading to learn more about these programs, their benefits and what to watch out for too.
Review your credit report before you decide on debt consolidation. In order to resolve your debt, you must first know how you got yourself in debt. Who do you owe? How much? Without this information, you can’t restructure your finances.
If you are checking out debt consolidation programs, you shouldn’t automatically think that a non-profit company will provide you with better terms. This is often used to disguise predatory lenders, so you may end up with poor loan terms. Go with a recommendation or check the Better Business Bureau on the company you are considering.
Figure out if the debt consolidation company you’re looking into actually has qualified counselors. Do the counselor have any certification? Do they have a reputable institution backing them to prove legitimacy or strength. This can help you sort out the good companies from the bad.
Think about bankruptcy if consolidation doesn’t cut it for you. It can be Chapter 7 or even 13, but it will ruin your credit. However, if you’re already not able to make payments or get any debt paid of, you may already be dealing with bad credit. Filing for bankruptcy will allow you to start reducing your debt and get on the path to financial recovery.
Interest Rate
Ask about your debt consolidation company’s interest rate. An interest rate that is fixed is the best option. This makes sure you understand the exact rate you will always be paying. You definitely want to be leery of an adjustable rate plan. Frequently, you end up making more interest payments than what you had originally expected.
You may be able to consolidate your debts by borrowing money from an acquaintance. You risk ruining your relationship if circumstances prevent you from repaying them, however. Only borrow money from someone your know if you have no other options.
Rather than a consolidation loan, try paying credit card balances with the “snowball” approach. Pick the creditor who charges the highest interest, and pay that debt down quickly. After that take your money that you’ve saved because you don’t have to pay that card and then put that towards another card. This is probably one of the best ways to pay your debt off.
Be careful with the paperwork the debt consolidation agency sends you. You have to pay close attention. Filling out something improperly will just make it harder for you to get the help you need.
So why are you in so much debt? It is important to think about this. If the cause is not addressed, the symptoms will surely reappear. Figure out what the issue is, put an end to it and continue to pay debts off.
Debt Consolidation
In Florida and Maryland, debt consolidation firms don’t have to have a license. If you live there, think about using a debt consolidation company from another state. When a company is not forced to be licensed, you enjoy little in the way of legal protection.
You can hold onto your real property more easily during a Chapter 13 bankruptcy if you go with debt consolidation. If all debts are paid within a three- or five-year period, you can hold on to your real or personal property. You might even be able to go totally interest-free on these debts.
If a loan is offered to you which sounds too good to be true, don’t fall for it. Reputable lenders are aware of the risk associated with lending money to you; therefore, they will ensure that you pay enough interest to make this risk worth it. Lenders who offer you incredible deals are usually scamming you.
If you happen to owe money to multiple creditors, try calculating your average interest. Compare the number with the proposed interest the agency offered to be sure debt consolidation is for you. If you have interest that isn’t that high, then you may not need to use debt consolidation.
Before you work with any debt consolidation business, figure out if there’s anything else you can do. You can usually get a deal from your creditor without hiring a counselor to negotiate for you. Tell your creditors your story, tell them you want to stay in good standing with them, and they will likely help you out, either with lower payments, or a lower interest rate.
Debt consolidation can help you out of your debt mess, but you have to choose the right plan. Go through the process slowly, using what you learned here to help guide you along until you find a debt consolidation company that is right for you. This way, you can make the best decision.
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