If you are receiving harassing phone calls from your creditors, you may benefit from debt consolidation. But just like anything big, relieving yourself of serious debt never happens fast. It is a carefully calculated and slow plan that takes time to form. The information that follows should help you make good choices when you’re considering consolidation.
Carefully study your credit report before making any decisions. To help start the process of improving your credit, have an understanding of what made you get into this situation. This helps you avoid the poor financial path again once your debt consolidation is in order.
Borrowing money can really help you pay off your debt. Speak with loan providers to help get the wheels in motion and determine the interest rate you might qualify for. It’s possible to use your vehicle as loan collateral. This borrowed money can help you repay your outstanding debt. Be sure to pay it all back as expected.
If you’re checking out companies for debt consolidation, you’ll need to find out what the company’s reputation is. This research will allow you to choose a company who will have your best interests in mind instead of just their company’s bottom line.
You might want to think about refinancing your house loan and using this cash to pay off your debts. Currently, mortgage rates are low, making it a great time for debt consolidation this way. Your mortgage payment might also be lower now than it was before.
Make sure you don’t borrow money from a company you haven’t researched. There are many different types of unscrupulous loan providers. If you borrow money for consolidating debt, make sure the loan provider has a great reputation and a reasonable interest rate compared to what the creditors are currently charging you.
Call each of the creditors you owe money to in order to discuss a settlement. Once you have an overall total, talk to your bank about getting one loan to cover payment on all of your debt. Most creditors will allow you to pay a lump sum of 70 percent of your balance. This can actually help your credit score.
Debt consolidation loans don’t affect credit scores. This type of loan, for the most part, just lowers the amount of interest on the loans you’re paying. It’s a very powerful option, as long as your bills are paid on time.
You might access your retirement funds to repay high interest debts. It’s crucial that you pay back any money to your fund that you take out, though. If you cannot pay the money back, you will have to cover taxes, penalties and will not have a retirement fund.
If no lender will lend you money, you can try to borrow from a friend or family member. Make sure to specify exactly how and when you will pay the money back, and live up to your promise. You don’t want to drive your loved one away.
Ensure that you’re working with a reputable debt consolidation firm and the counselors are certified. You can use the NFCC to find reliable companies and counselors. This way you can have peace of mind knowing that you’re making the right decision and the people are there to help.
Once you have established a plan for consolidating your debt, you should aim to pay everything in cash. You never want to fall back into your old ways of having to use credit cards to pay for everything. That may be exactly the bad habit that forced this situation initially! Paying cash means that you just use what you have.
One method of debt consolidation is to take a loan from someone you know. Use caution as an unpaid loan can ruin a relationship. Only borrow money from someone your know if you have no other options.
Debt consolidators need to use personalized methods. If the professional doesn’t ask you questions about your situation and debts, you may want to look elsewhere. That approach is unlikely to be effective.
Take the time to do the proper research on a handful of legitimate companies. Use consumer watchdog groups and the BBB to make sure you are not entrusting your finances to a disreputable company with a negative history.
When speaking with a debt consolidation company inquire about their fees. Every fee should have an explanation attached, and it should be written down in the contract. Be aware of how the consolidator will be splitting the payment between your different creditors. They should give you a written payment schedule which explains when each debt will be paid off fully.
Debt consolidation agencies located in Florida and in Maryland do not have to be licensed. Avoid doing business with companies in those areas. Your legal protection will be extremely limited if you work with a person that is not licensed.
No matter what timeline a debt consolidation company provides to you, aim for a payoff within five years. The more you delay it, the greater the interest costs, and the greater your likelihood of default.
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. Keep making your monthly debt payments, even if never in full, just to keep your rates as low as you can.
Look at the Better Business Bureau’s site to learn more about different companies. Companies with low grades and many complaints should be avoided.
Debt consolidation can be a serious benefit if you use it responsibly. It isn’t enough to just place a phone call; you need to know what you’re up against. This article has gone over a lot of the things you can do if you’d like to get rid of the debt you have, but you have to take the steps for it to work.