Debt is a depressing situation that only gets worse as it is allowed to continue. Some people do things without thinking when they are in a bad financial spot. Rather than drown yourself in negativity, continue on and learn about ways to help you through debt consolidation.
Check out a credit report before seeking debt consolidation. You need to know how you got into debt. Assess your debt and document how much you owe and who it is owed to. You won’t know how to restructure finances if you do not know this information.
Do not pick a debt consolidation just because they say they are “non-profit.” Being non-profit doesn’t mean that they are the best agency to help you with your needs. If you wish to figure out if companies are good at what they do, see if you can find them on BBB’s website at www.bbb.org.
Your creditors should be told that you’re working with a service that handles debt consolidation. Some creditors will work with you to lower your interest or adjust payments as necessary. Your creditors may not be aware that you are trying to work with someone to resolve your debt. Knowing that you are working hard to solve your problems can make a big difference.
You can lower your monthly payment by calling your creditor. They want you to pay them back, so they will work with you. If you cannot afford the minimum payment on your credit card, call the company to explain your problem and they may allow you to lower the minimum payment, but will discontinue the use of your card.
When in the midst of your consolidation plan, reflect on how you got to this point. Knowing what started it will help you avoid it happening again. Look deep into yourself for answers, and make sure this doesn’t happen to you again.
You can get a loan taken out so you can pay off your current debts. Then you’ll be able to speak with your creditors so you can see if they’re able to settle with you. In many cases, creditors will be willing to forgive up to 30 percent of your debt if you get the rest paid off immediately. This doesn’t negatively affect the credit rating and may boost your score.
Figure out which of your debts should be consolidated and which should remain as they are. It does not typically make sense to consolidate a loan that you currently have a zero percent interest rate on into a higher interest rate loan, for instance. Your lender can help you evaluate each loan to determine if it should be consolidated or not.
Ask a friend or family member for a loan if you can’t get a loan anywhere else. Be sure though that you spell out the terms of the agreement and know exactly when the money needs to be paid back. You want to avoid hurting a relationship with someone close to you.
Find out if your chosen debt consolidator is also a licensed credit counselor. You can contact NFCC for a list of companies that adhere to certification standards. This will allow you to rest easy that the company you are using is trustworthy.
If you really need to escape debt, think about taking money out of your 401K. In this way, you are borrowing from yourself rather than from an institution. However, understand that you could be negatively affecting your future by doing so; give it careful consideration.
When speaking with a debt consolidation company inquire about their fees. These fees should all be within the written contract with explanations. Make sure to ask how the loan will be divvied up between each of the creditors you have that need to be paid. The company handling your debt consolidation will prepare a payment schedule, and you should get a copy so you can see how much each creditor will be paid monthly.
With debt consolidation, the main goal is to get a simple single payment that’s affordable to you in any month. A solid five year repayment plan is something to shoot for, but you can go longer or shorter, as it all depends on your own situation and what you can afford. Setting up a structured plan will help you work towards the goal and will give you an idea of when you can expect to payoff the debt.
Some people get so despondent that they end up making bad choices when they are buried under debt. It doesn’t have to be that hard. After reading this article, you should have a well rounded idea of what debt consolidation involves.