How much do you know about debt consolidation? It could be that you have heard about it without realizing how it might help your personal financial situation. If you’re struggling to pay off your debts, a debt consolidation program may be what you need. Making the right decision is crucial. Keep reading to find out more about such programs along with their pros and cons.
If you are looking for a debt consolidation loan, attempt to obtain one with a fixed rate you can manage. Any other type of loan may leave you in the dark about what your actual payment will be each month, which can get difficult. Seek one-stop loans that have great terms over their life and that help your financial position when you’ve paid the loan off.
Do you own a house but have debt? Refinance it and use the money to pay off your debts. Since mortgage rates are showing historical lows, this could be a great solution. In addition, your current mortgage payment could be less than what you had started with.
Use a loan to repay all outstanding debts, then contact your creditors to see if they will negotiate a settlement. Often creditors will accept a lower payout than the amount owed, if you pay in cash and pay the entire amount off. Not only does this not hurt your credit score, it might even boost it!
While debt consolidation can be a wonderful option, you have to be sure you’re not being scammed. If someone offers a deal too good to be true, do not trust them. Ask the lenders plenty of questions and be sure they’re answered before signing for their services.
Identify a reputable non-profit consumer credit counseling service in your general area. These offices are able to help you manage debt and combine all accounts into a single one. Also, this will have little to no impact on your credit score.
401k Plan
If you are in a bind and quickly need to pay down your debt, look at your 401k plan to help with debt consolidation. Borrowing from a bank or from another financial institution will probably cost you more than borrowing against your own 401k plan. Be sure you know what you’re getting into, however. You still want to make sure you’ll have some retirement money left.
What has caused you to have so much debt? This is something that must be figured out before beginning the process of debt consolidation. If the cause is still there, a loan will not fix the initial problem. Once you have determined the cause, end it. Now, you are ready to move forward in eliminating your debts.
Is debt management a viable alternative? If it’s possible to meet your all of your financial obligations with a sufficient amount of organization and management assistance, this may be a faster, better alternative to consolidation. Just find a good firm to negotiate lower interest rates on your behalf.
A truly reputable agency will provide education on managing your finances so that you avoid going into debt in the future. You can also attend classes that will help you with this matter. If your consolidation counselor isn’t offering these services, you may need to go elsewhere.
Once you complete your list of creditors, find out details on each specific debt. Note the full amount owed, interest rate being paid, and required monthly payment. You must have this to keep going with the debt consolidation.
Debt consolidation can help if you’re going through a bankruptcy. You are permitted to retain personal and real property if arrangements can be made for you to satisfy your obligations in 3-5 years. It is possible that you may also qualify to have the interest forgiven from your debt.
If you are taking out a loan for debt consolidation, aim to repay it back within five years time. If you wait longer, then you end up paying more interest and are less likely to pay everything off.
Keep in mind that lenders are going to see missing payments on credit reports, and that will make a difference in the interest rates you get for debt consolidation loans. Pay at least a part of your debt each month so your loan won’t have high rates.
Debt Settlement
If you’re in a lot of debt and wish to get it consolidated, know that there are a couple of types. Debt settlement is just one type, while debt consolidation is a completely different way to get a handle on debt. When consolidating your debt the balance is never lowered but your credit score doesn’t take a hit. Debt settlement has a negative impact on credit, but your debt will be reduced.
Debt consolidation can help you out of your debt mess, but you have to choose the right plan. Take some time out of your day to figure out what this kind of service is all about and be sure you’re taking the advice in this guide to heart as well. You’ll make wiser financial choices.
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