Many people turn to debt consolidation whenever they have accumulated a lot of debt from numerous debtors. It can help them get debts paid on time. However, you need to understand a few things before you proceed.
Whenever you’re considering debt consolidation as a plan, first look over your credit report. You should know where your debt came from. Find out how much you owe and whom you owe it to. You aren’t going to be sure how you should restructure your finances without that information.
Don’t try to work with a company doing debt consolidation because they’re a non profit one. Non-profit does not always mean that it’s great. Instead, look up the company on the BBB to determine if you want to do business with them.
Many people find that they can lower their monthly payments by simply calling their creditors. Many creditors are more than willing to work with consumers to resolve their debt situation. Let your credit card company know you cannot afford to make your payments, and they are likely to lower your monthly payment amount. During this time, however, your account will be closed to new charges.
Attempt to negotiate settlements with your creditors before choosing debt consolidation. You may be surprised to learn that the average creditor will settle for far less than you owe, and sometimes that amount is as low as 65%. This will help your overall credit score, rather than harm it.
Debt consolidation offers financial assistance, but you must avoid scams. If you see offers that are simply too good to be true, then they probably are. Ask the lender a bunch of questions and be sure they’re answered prior to getting any kind of a contract signed.
You might be able to cover your debt by borrowing against your 401k plan or your IRA. Do not consider this unless you know for sure you can pay back the amount withdrawn. Otherwise, the money is considered an early distribution of retirement funds, and you are on the hook for penalties and taxes.
Find out if your chosen debt consolidator is also a licensed credit counselor. Check the agency out through the NFCC. This way you can have peace of mind knowing that you’re making the right decision and the people are there to help.
If you need to eliminate debt and feel desperate, you might borrow from your own 401k. In this way, you are borrowing from yourself rather than from an institution. Be sure you know what you’re getting into, however. You still want to make sure you’ll have some retirement money left.
Ask for the fees that you will owe debt consolidation agencies. You should be provided with a detailed list of fees that they charge for their services. Understand that these counselors will not be able to collect money from you until they provide service to you. Avoid any company who ask for money upfront before the services are performed.
Find out what fees are charged by any debt consolidation business you are considering. It’s important to make sure that each fee associated with a loan is fully spelled out in the contract. Make sure you inquire about how much each creditor will be paid each month. Ask the company you use for a schedule that will show you when payments will be paid out to every creditor.
Debt Consolidation Companies
It is important to realize that license laws for debt consolidation companies are not in place in Maryland and Florida. If your state does not mandate that debt consolidation companies be licensed, consider finding an out of state agency. Working with a counselor who is not licensed means your debt consolidation counselor is not obligated to follow strict regulations.
Debt consolidation is great for anyone who is overwhelmed by debt. The tips from this article will help fix your financial situation. Keep educating yourself on the process, and you will find yourself in much better shape in the future.