Find The Best Way To Consolidate Credit Card Debt
When you are under financial strain, it is easy to succumb to the temptation to jump at the first debt consolidation company that promises to be your magical cure for a difficult situation. While this response is understandable, it can also be quite detrimental to your financial future.
There is definitely a right, and a wrong, way to consolidate debt.
The correct way to consolidate debt includes a 3-step process that helps you steer clear of the major pitfalls of the credit relief industry. Take your time and do things right to avoid winding up in a worse credit situation than the one in which you first began.
Consolidating debt is a solid way to steadily work toward becoming debt free. If you work with a reputable company and follow through on your personal financial responsibilities, consolidation can help you pay off what you owe with zero stress and plenty of hope for the future.
Step 1: Pick the Right Debt Consolidation Partner
Interest rates, upfront and maintenance fees, and penalty charges are all major considerations when choosing the right debt consolidation company with which to do business. If any prospective company has excessive small print in its contract, gives you the run-around when you raise questions, or justifies extra monthly fees that seem to have no merit, it is probably not the right partner for you.
Choosing the right company to consolidate credit card debt with is the single most important step to doing consolidation the right way. Be sure to compare numerous credit relief companies against one another, vet thoroughly each prospective company via consumer watchdog organizations, and read unbiased feedback on companies via online financial forums.
Do not be afraid to ask questions from your favorite credit relief agency in order to understand the terms and confirm that they are reasonable to you.
If a debt consolidation company starts your relationship with an attempt to overcharge, you are right to question whether it has your best interests at heart when it comes to creating a consolidation plan.
Step 2: Create a Comprehensive Financial Plan
Before you figure out how much you are able to pay on your consolidation loan every month, you need to work out a comprehensive financial plan with the help of skilled credit relief representatives within your consolidation agency of choice.
First, create a realistic budget that accurately represents both your average income and expenses for any given month. Make sure to build an emergency fund, and a savings account for the future, into your monthly expenses.
Once you have a good handle on how much money you have to work with every month, create a consolidation loan repayment plan that is as short-term as possible. The more you can pay on your principle amount borrowed each month, the less you can expect to pay in interest over the long term.
Don’t strain your budget, but do sacrifice a few luxuries to make sure that you can pay off your consolidation loan as fast a humanly possible.
Step 3: Follow Through with Your Debt Consolidation Program
Every time you make one of your monthly debt consolidation payments on time to your credit relief agency, this positive activity is reported to the major credit bureaus that are responsible for generating your overall credit score. Conversely, every time you miss a payment this negative activity is also reported to the same credit bureaus. The only way to rebuild your credit history over time is to follow through on making your monthly payments during the entire course of your consolidation loan repayment plan.
In addition, many credit relief agencies have it written into their loan agreement that if you miss a scheduled payment you are subject to steep penalty charges or even a dissolving of your original loan terms. This can result in increased interest rates that leave you in worse shape than when you first began.
It is also important that you stick to your budget, and save money, during the entire process of consolidating debt and paying it off.
If another emergency arises and you have not adequately prepared your finances, you can find yourself right back in the middle of an oppressive debt situation. The only way to change the state of your finances is to become personally responsible for living within your means, and putting away money for an emergency or major upcoming expense.
Consolidating debt is often a wise move for men and women who are overwhelmed with the burden of making monthly payments to several aggressive collection agents. Credit relief programs allow you to take your finances by the horns and steer yourself toward a stable financial future. Be wise and invest the time and energy it will take to consolidate credit card debt the correct way. This choice will reward you in the end with a solid consolidation plan that you can count on to get out of debt in a reasonably short period.