A Helpful Guide to the Debt Consolidation Process
Crushing debt can add a large amount of undue stress to your life. If you are tired of making minimum payments to several different creditors every month, debt consolidation provides an effective means of streamlining your repayment plan. Simply write one check per month directly to your consolidation company, and never worry again about juggling due dates or missing payment deadlines.
While consolidating debt is a healthy solution for many individuals in oppressive debt situations, there are many steps to the process that must be fully understood and acted upon in order to get the most out of any credit relief program.
Consolidation is a tool that will help you gain control over your shaky finances. However, it is not a quick fix. A complete overhaul of the way you spend money, and a solid plan for working with a credit relief agency to achieve your financial goals is essential to following through on your dream of becoming debt free.
No consolidation company can do the hard work for you, and you must learn how to advocate for yourself before enrolling into any new debt consolidation program.
How Debt Consolidation Works – 2 Methods
As Business Insider shares that eliminating debt is a good start in gaining control over your finances, debt consolidation is a great option in achieving this. Typical debt consolidation is typically carried out via a single large loan granted by a credit relief company or banking institution. This loan amount is used to pay off all of your credit accounts in one fell swoop. You then repay the amount you owe, with interest, directly to the consolidation company via a single recurring monthly payment that is designed to fit comfortably into your budget.
A second method of bill consolidation is when your consolidation agency helps you negotiate with each of your current creditors to settle your accounts for up to 60% off the original amount owed. When you have a large lump sum of money to negotiate with, creditors are often willing to negotiate lower settlements to reduce their risk of having to turn over your account to a collection agency that pays just pennies on the dollar.
While debt settlement is a separate service than debt consolidation, the two often work hand-in-hand. The credit card relief counselors at DebtConsolidationUSA.com can help you determine whether the settlement is a good option in your particular case. The second method is preferred these days as most people are unable to qualify for less than perfect credit for a large enough debt consolidation loan at a low enough interest rate to make the consolidation loan route viable.
How to Find an Honest Consolidation Company
Not every credit relief agency out there has your best interests at heart. In fact, consumer consolidation fraud is a major concern in the financial industry today. You should never sign a loan agreement with a company before researching thoroughly their current standing in the business world. For instance, you find out that watchdog organizations like the Better Business Bureau don’t praise your particular consolidation company. You would be wise to keep looking for a credit relief option that has proven itself worthy of your business.
In addition, you should always compare several different consolidation companies before choosing one to handle your account. Be sure to negotiate with a handful of your top choices. This will secure the very best interest rate possible or a proven track record of getting the best settlement offers.
Also, avoid companies that charge upfront fees or monthly maintenance fees for their services. Such fees are illegal in many states. If you have questions about any fees in your consolidation agreement, be sure to bring it up with your agency. Do this before signing on the dotted line. Never commit to a bill relief agency that is not being completely transparent with you from the start.
Create Aggressive Loan Terms
A debt consolidation company generally lets you set your own loan repayment terms, allowing you take as long or short a period as you like to pay off your total amount owed.
Realize that the longer term your repayment agreement is, the more you will pay in total interest. That is why Forbes encourages college graduates to pay off high-interest debts first. Create repayment terms that are as aggressive as possible, without putting undue strain on your monthly budget. A bit of sacrifice in the present can save you a lot of money in the end.
How to Do Your Part to Change Your Financial Future
A good debt consolidation company can stop the immediate bleeding of your finances. This financial bleeding is caused by missed monthly minimum payments and negative reports to credit score agencies. However, it is important to now that it cannot address the root causes of your debt.
Did you get into debt because you regularly spend more than you earn? Have you put emergency services on your credit card because you are not putting away a monthly sum into a special account for emergencies? Have you created a realistic budget?
If you answered yes to any of these questions, you will need to make some changes. Especially in the way you handle your personal finances. A good credit relief agency should be willing to provide you with plenty of financial resources. This can help you educate yourself on creating a budget, setting up an emergency account, and saving for the future.
Make sure to take advantage of these educational opportunities. They can help prevent you getting in over your head with debt again.
Related Debt Consolidation Articles:
- How Debt Consolidation Programs Have Evolved
- How Does Debt Consolidation Work
- Pros and Cons of Debt Consolidation | Debt Consolidation Benefits
- Questions to Ask Debt Consolidation Companies
- Debt Consolidation Fees & Costs
- A Few Debt Consolidation Tips That Save You Money
- Debt Consolidation FAQ | Answers to Debt Consolidation Questions