Excessive debt can cause long lasting damage to your future, not to mention the stress it causes you in daily life. However, just by going over this information you are helping yourself understand the process of debt consolidation which can eventually lead you to financial relief. These tips will help you get started on your journey to a debt free life.
Before starting any debt consolidation program study your credit report. You need to understand what happened to get you into this mess. Doing this will prevent you from getting into financial troubles once again.
Don’t make a debt consolidation choice just because a company is non-profit. Even though it may seem like a good deal, non profit doesn’t always mean good deal for the consumer. To determine if a company is reputable and high-quality, research the company’s standing with the BBB (Better Business Bureau).
Bankruptcy may be a better choice for you than debt consolidation. Of course, any type of bankruptcy is bad for your credit. However, when you are already missing payments or unable to continue with payments, you may already have a worse looking credit report than a bankruptcy will be. A bankruptcy filing will help you reduce debt and regain financial control.
Fixed Rate
When searching around for a debt consolidation loan, look for one that offers a fixed rate that is low. A loan without a fixed rate may leave you wondering how much you owe each month. Try to find a loan that will benefit you throughout the entire time that you have the loan.
While you are working at consolidating your debts, try to understand how you ended up in this position. You probably don’t want to acquire debt again. Do some soul-searching to find out how you got into this situation, so that it never happens again.
You might consider drawing money out of your retirement fund or 401K to pay your high interest loans. Only do this if you can afford to pay it back within five years. Otherwise, the money is considered an early distribution of retirement funds, and you are on the hook for penalties and taxes.
If borrowing money from a bank is not possible, friends and family might be amenable to helping. Let them know when you intend to pay them back and make sure you do it. You don’t want to drive your loved one away.
It is possible to borrow against your 401K if your debt situation is really bad. This lets you borrow from your own money instead of an expensive bank. Be sure you know what you’re getting into, however. You still want to make sure you’ll have some retirement money left.
Debt Consolidation
A good debt consolidation firm will use personalized methods. If the staff at a debt consolidation agency seems eager for you to sign an agreement, it may be wise to look for a different agency. Your debt counselor should develop a personalized solution for you.
See if the debt consolidator will customize payment programs. Some companies use a method that is the same for every customer, but everyone has different needs so be sure they offer you options. You should go with companies that allow for individualized payment plans. Although these may appear more expensive in the beginning, they actually will save you money in the long run.
When consolidating debts, you want to have one payment that’s affordable each month. Most plans will allow you to pay your debt off in three to five years depending on how much you owe. Then you will have a solid schedule of payments and an attainable goal in sight.
Real Property
If you’re working on Chapter 13 bankruptcy you may be able to keep a hold on your real property with debt consolidation. You are permitted to retain personal and real property if arrangements can be made for you to satisfy your obligations in 3-5 years. You might even be able to eliminate all the interest charges during this time.
If you happen to owe money to multiple creditors, try calculating your average interest. You are able to compare this number to the interest rate offered by the debt consolidation companies to ensure you have made a good decision. If your average rate is low, you might not need to consolidate.
Think about your long-term financial goals prior to contracting a debt consolidation plan. You may not need to use a debt consolidation company if you’re in no rush to pay debts off. If however, you need to pay all your debt off quickly for any reason, you may find that debt consolidation can help with that.
If you’re thinking of taking care of your debt by getting it consolidated, see if a family member can help you first. You may find it much simpler to make a single monthly payment to one person, rather than having to juggle making several payments to several debtors. In addition, your interest rate should go down.
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. Make sure that you make your payments each month. You should also make sure that the loan has a low interest rate.
Once you have a short list of debt management companies to select from, check out the Better Business Bureau website to see if they have any complaints against them. Companies such as this which are a scam will be reported time and time again, so you can find out who to avoid.
Debt is something that has the power to ruin marriages, cause never-ending sleepless nights and damage self esteem significantly. By choosing to do something about it, you are taking a step in the right direction. Hopefully, you’ve just learned what you need to know to begin your journey toward financial recovery.
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