Make Smart Decisions About Debt Consolidation
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The average American family owes almost $16,000 in credit card debt, $28,000 in auto loans, and almost $50,000 in student loans, medical bills, or other unsecured debts.
These staggering statistics account, in part, for the rising popularity of debt consolidation loans.
What is Debt Consolidation?
Debt consolidation combines all of your debt into one loan, usually at a lower interest rate than you were paying individually. Debt consolidation does not eliminate your debt, it simply makes it easier to handle.
Consolidation your Debt is not the same as credit counseling, although counseling may be a good idea if you need debt consolidation. When you obtain a debt consolidation loan, it’s important that you don’t continue to spend so that you incur additional debt.
If you’re consolidating student loans, you’ll need separate consolidation loans for federal and private student loans; you can’t combine the two.
My Best Option
Your total amount of debt is the primary determining factor for which type of debt consolidation loan is best, although your credit score will affect your interest rate on the loan.
National Debt Relief
National Debt Relief is one of the country’s largest and one of the most reputable debt settlement companies. They are made up of energetic, smart & compassionate individuals who are passionate about helping you with debt relief. Most importantly they focus specifically on customers through tough financial time in their lives with education and individual customer service.
The bottom line of National Debt Relief is that they negotiate with your creditor so you can be given pardon for your inability to pay off your debts. Specifically, they will waive off late payment charges and ultimately allow you to pay for only a portion of the original balance.
While there is no doubt that some people can manage this on their own, there are negotiation skills and industry expertise needed to accomplish the intended agreement. Creditors may be intimidating and you may not be the best person to handle it.
Particularly for those who have a significant amount of student loan debt, a debt consolidation loan can provide a more convenient and cost effective way out of debt.
If you need help with your debt, try a Free Debt Relief Quote
Benefits of Debt Consolidation
Although you may pay slightly more interest with a debt consolidation loan, the benefits can far outweigh the extra expense. A debt consolidation loan is convenient; it allows you to make one monthly payment to the lender rather than several payments to multiple creditors. Usually, the monthly payment is significantly less than you were paying for the individual debts, and the interest rate is usually a fixed rate rather than a variable rate.
Since a debt consolidation loan may take a little longer to repay than the debts would if paid individually, you may pay a little more in interest over the course of the loan. However, if you’re having trouble making all of the payments timely, then a lower payment for a longer time can save or salvage your credit rating, even if you pay slightly more interest.
Consolidating your debt and paying off creditors will prevent overdue bills from being sent to a collection agency, some of which are notoriously predatory. Since collection activity negatively affects your credit rating, you’ll be able to maintain a better credit score by utilizing a debt consolidation loan.
Using debt consolidation is a great way to become debt free, and many resources are available to help you. You can also work with your financial institution to combine your loans into a single loan with a lower interest rate. Or you can get help from National Debt Relief or CuraDebt.
CuraDebt says it will work with as little as $5,000 in debt in certain circumstances, so if you have a smaller amount of debt, it might be worth a look. Incorporated in 2000, CuraDebt is also one of the more established debt-consolidation companies. (CuraDebt’s services are available in 37 states. You’re out of luck in Colorado, Connecticut, Georgia, Idaho, Illinois, Kansas, North Dakota, New Hampshire, South Carolina, Vermont, Washington, Wisconsin, and West Virginia.)
In this economy, more and more people are falling behind on their bills, having their vehicles repossessed and homes foreclosed. The demand for credit repair companies has skyrocketed and of course there are going to be unscrupulous people looking to take advantage of the opportunity.
Types of Debt Consolidation Loans
Debt consolidation loans are available in several forms.
•Home equity loans
•Balance transfers to a zero-interest card
Debt Consolidation Plans
Debt consolidation also takes the form of debt management plans and debt settlement plans but both of those plans can significantly and adversely affect your credit rating. For more information on the differences between these three, click here.
Some types of debt consolidation recommend that you attend financial management classes in order to prevent yourself from becoming mired in debt again. Although it may not be mandatory, it may help you to achieve financial stability. Many debt counseling agencies are available to help consumers who may, through no fault of their own, find themselves in overwhelming debt.
Reputable Debt Consolidation Companies
The Federal Trade Commission, or FTC, has a website dedicated to selecting debt consolidation and debt management firms; all the firms listed have been vetted by the FTC.
Long Term Financial Health
Be sure to understand the reasons and circumstances that landed you in massive debt so that you can avoid them in the future.
Managing Your Debt
Have a plan for the future. Set up your own 12-step program, or the number of steps you need, such as:
•Make a schedule of all your bills and their due dates
•Budget your income so that you can pay the bills timely
•Call creditors to change your due date, if necessary
•Make at least the minimum due each month on all bills
•Pay off bills one at a time, if necessary
•Pay charge offs and accounts that have gone to collections, if applicable
•Set up an emergency fund and use it only for emergencies
•Stick to your budget
•If you need help, ask for it
Living debt free is a wonderful way to live. The stress of financial woes can adversely affect your health and your relationships, so eliminating it will greatly enhance your well being and your lifestyle.
Are you interested in financial freedom? What other questions do you have for me on how rid yourself of debt?
If you are interested in learning how how to get out of debt, I created a FREE 10 Days to Financial Freedom eCourse tutorial that will help you get out of debt.
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