Is it looking more and more like you need to file for bankruptcy because of the growing stack of bills that have become increasingly difficult to pay? Before choosing this unfortunate path, learn the truth about the option of debt consolidation. You may even save your credit score, by consolidating your debt.
What is Debt Consolidation?
When growing debt becomes an issue, many consumers look to debt consolidation for answers. However, “debt consolidation” is a broad term that can mean a number of things, which might surprise novice consumers who are checking it out for the first time. Begin to understand what your best options are, if you find yourself in credit card debt (or any other kind) by checking out this debt consolidation guide. Debt consolidation generally refers to one of the following services:
- Consumer Debt Management and Credit Counseling
- Debt Consolidation and Home Refinancing
- Debt Consolidation Loan Information
- Credit Card Debt Settlement
Regardless your financial situation, you must know all of the debt consolidation options that are available to you.
Research Your Debt Consolidators
Unfortunately, there are debt consolidating organizations that are quick to take advantage of consumers who already find themselves deep in financial trouble. While these organizations often make promises regarding how far they’ll help you get out of debt, the majority of these claims can be either misleading or downright false. In fact, doing business with the wrong organization can end up harming you
Three Ways to Pay Your Debts
Interest Rate Arbitration: You’re awarded a secured or an unsecured loan at a low-interest rate, helping you pay off any current higher-interest unsecured debts in your name. This option helps you manage debts, significantly reducing both interest rates and monthly payments significantly.
- Interest rate reduction
- Lower monthly payments
- Gradual increase in your credit score
Debt Management Plan: You receive debt counseling and advice from credit counseling organizations that specialize in knowing how you should deal with your debts. The advisors of these organizations can help you plan your budget and lower your interest rates.
- Lower interest rates
- Elimination of late fees and penalties
- One monthly payment
- Re-aging accounts
- Predictable debt payoff time frame of five years or less
How to Settle a Debt
Debt Settlement: With this option, you, your attorney or a debt management company negotiates with your creditors to agree on a reduced amount that they will accept as payment in full. There are many lenders that offer debt settlement and it is one way you can quickly get out of paying the total amount that was originally owed.
- Lower payoff amount
- Debt-free sooner, than by enrolling in a debt management plan
Is Debt Consolidation Right For You?
No matter the specifics of your personal debt situation, debt consolidation might be the best decision you’ve ever made for your financial stability. The more information you have about debt consolidation, the easier it is to make a decision on the course of action. One popular debt plan is a debt consolidation program that helps replace your bills with one easy and affordable monthly payment, helping you pay off your debt at a quicker pace. Make sure to be fully informed of all the benefits you can take advantage of when consolidating debt.
Debt Consolidation Loan
A debt consolidation loan merges your debts of different terms and interest rates into one loan with a lower monthly payment. You can apply for this loan with the lending institution that you trust. Your entire financial situation will be expertly analyzed, before the lending institution you’ve chosen pays off all of your outstanding loans. From there, you’re held responsible for repaying your new lender with single payments every month until you are fully financially independent again.
If your goal is to become debt-free without filing for bankruptcy, you have options. You can either choose to consolidate your debt by talking to a debt consolidation company, apply for a debt consolidation loan or you can settle your debts by negotiating with your creditors. Take control of your finances today by gaining the knowledge you need to help you eliminate your debts for good.
James Goldbloom is a contributing financial author who specializes in debt-related topics, having overcome numerous personal money-related difficulties. He now works at a credit counseling agency.