Are you familiar with debt consolidation? Are you in over your head? It’s probably time for you to take care of your finances and this is what debt consolidation can help you to achieve. Learn more about it in this post, including the many options that can help.
When you are considering debt consolidation, don’t automatically trust a service that says it is a nonprofit, or think they will cost less. These types of companies can be predatory, and your loan terms can be very unfavorable. Check with the BBB or go with a personally recommended group.
Use a long-term perspective when choosing your debt consolidation firm. You’ll want to find out if the company will be able to help you later on. Many offer services that can help you today, tomorrow and well into the future.
Let your creditors know if you’re working with a credit counselor or debt consolidation agency. They may be willing to discuss alternative arrangements with you. This is essential, since they would otherwise be unaware of the steps you are taking. Plus, they realize that you are attempting to responsibly manage your debts.
Think about bankruptcy instead. A bankruptcy, regardless of type, will leave a stain on your credit report. Your credit is probably already terrible, if you can’t pay your bills and are missing payments. A bankruptcy filing will help you reduce debt and regain financial control.
You can get help from debt consolidation firms, but be certain your firm is a reputable one. If you see offers that are simply too good to be true, then they probably are. Question the lender closely, and don’t proceed until you feel comfortable with the information you have received.
Using your 401-K, you can pay off your debts. This shouldn’t be done unless you’re sure that this money can be paid back into your account. Otherwise, the money is considered an early distribution of retirement funds, and you are on the hook for penalties and taxes.
If you’re not able to get money from places, you should see if a loved one is willing to help. Be sure you’re able to tell them when you’re able to pay things back and keep your promise. You don’t want to ruin a relationship over money.
Certified Counselors
Find out if the debt consolidators you’re using are certified counselors. Consult the NFCC to find companies that use certified counselors. This way, you’ll be more certain that you’re dealing with legitimate people.
When meeting with a debt consolidation company, you should ask about any fees that they may charge. You should always receive a fee schedule from any debt consolidator. The services for your consolidation must be completed before a professional service can ask for payment. There shouldn’t be any fees just to set up an account.
Always be fully aware of fees and charges on a loan consolidation because they can quickly add up, even if the interest rate is low. The fees need to be provided in writing and explained fully. It is also a good idea to find out how your payment shall be split amongst creditors. The consolidation firm should give you a schedule showing when each creditor will receive a payment.
Document your debts in detail. Note the full amount owed, interest rate being paid, and required monthly payment. You will need this as you move forward with your debt consolidation.
Even a debt consolidation loan comes with fine print, so be sure to read your contract in full. You must be aware of all fees associated with the loan so that there are no surprises. By reading your contract, you will know exactly what is involved in your loan.
Interest Rate
If you have several debts, figure out your average interest rate. Compare that figure with any interest rate number the debt consolidation companies offer to ensure you are making a smart decision. If it’s pretty low, then you may not need consolidation.
Consider your long-term financial objectives prior to seeking a consolidation program. If you plan to slowly pay back your debt, then perhaps using debt consolidation might not be the answer. But, say you have something important coming up that requires you to be debt-free, you may want to go with debt consolidation.
Before taking out any loan, see if you have the equity available or credit needed to tackle some of the outstanding debt you owe. For example, if you have a line of credit on your home, you may have some equity in it you can withdraw.
Family Member
If you want to get all of your debt consolidated, you may be able to borrow money from a family member. This may be an easier way for you to pay back all your debt at one time each month. Also you may not have to pay interest with a family member like other places would charge you.
When considering a debt consolidation company, calculate how much money it will really save you each month. Figure out your total debt, the monthly interest amount for each creditor and any other charges you may incur, such as late fees and over-the-limit fees. Take that number and compare it to what you would pay if you consolidate your debts; make sure you are getting a good deal.
You should end up with only one payment when you use a debt consolidation company, and they should handle all the monthly payments to your individual creditors. If they only provide you a loan, it is probably not a legitimate company. Find a pro that can provide a loan to you and help you manage payments.
Now that you’ve read the information in this article, you are equipped to make a decision. Make sure your decision is made when you are fully informed and takes your specific needs into consideration. Regardless of your decision, start to work on your debt. No longer are you going to be consumed; it’s time to live!
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