Debt is a depressing situation that only gets worse as it is allowed to continue. Many people do things they would never have considered until they face financial ruin. Instead of being negative about these things, go through this article about debt consolidation for some help.
Check your credit report before doing anything else. The first thing you have to do to get your credit into shape is figure out what got you in your situation. This ensures you don’t take the same destructive path after you have eliminated your debt.
Do not assume a non-profit company is your best bet when looking at debt consolidations companies. Many predatory debt consolidators or predatory lenders will hide behind a nonprofit persona but may give you many expensive reasons to regret working with them. Check the BBB.org website to find a highly reputable firm.
Are you on life insurance? You may wish to cash it in to pay off the debt. See the total amount you can get for this policy and determine how much it will help you. It may help you reduce your debt to a more manageable level.
Your creditors need to know if you are in consultation with either a debt consolidation business or a credit counseling professional. Your creditors may wish to work with you to offer different options with you so that you can avoid having to consolidate debts. This is crucial, as they’re probably unaware you’re speaking with others. Knowing you are attempting to make things better might help your case.
Interest Rate
Ask about your debt consolidation company’s interest rate. The best thing to go with would be an interest rate that’s fixed. This way you know the amount you will be paying for the duration of the loan. Watch out for variable interest rate plans. They end up getting higher and higher, leaving you unable to pay.
Don’t get money borrowed from a professional if you don’t know anything about them. They may be loan sharks that are looking to prosper from your poor situation. Choose a lender who is reputable, trustworthy and comes highly recommended.
Look for a credible consumer counseling agency in your local area. A credit counselor will help manage your debt by putting all accounts into one account. Using a counseling service doesn’t hurt your overall credit score like using a professional debt consolidation service might.
If you have a 401-K, you can use it to reduce your debts. It allows you to borrow what you need from yourself instead of having you borrow from regular banks. Get all the details first though; it can be risky because it can deplete your retirement funds.
Your consolidator should personalize their plans for you. If you’re not able to get people at the company to take their time with you, then you probably aren’t going to get good service and should look for help elsewhere. A debt counselor should work with you to come up with a personalized answer.
Ask the company about what their privacy policy is. Inquire about their procedures for storing highly sensitive information. Ask whether encrypted files are used. If it isn’t, you can be at risk of getting your identity stolen by computer hackers.
Homeowners with a mortgage can use refinancing their mortgage rather that choosing a consolidation loan. The money you save on your mortgage payment should be used to cover your most outstanding debt. This is cheaper and quicker than debt consolidation.
Debt Settlement
If you have a ton of debt and are considering consolidating, be aware that there’s two different kinds. Debt consolidation is very different than debt settlement. Debt consolidation involves consolidating your payments, while not affecting your credit score. Debt settlement will lower the amount owed, but it must be paid immediately and your credit report will reflect it.
Before turning to a company that provides consolidation loans, be sure that you weigh up other options first. Sometimes you can do this work on your own, negotiating with your creditors, for free. Explain your situation to your creditors and see if they are willing to help by either lowering your payments or lowering your interest rate.
People in debt make irrational choices sometimes. This is easy to avoid once you have the right information, which you now do. The advice above will guide you to find the plan that is right for your needs.
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