How you go about solving your debt problem will depend on your overall financial picture. Californians with really bad credit may only have bankruptcy as an option. At least that is what many believe is the best way out of debt. Debtors who cannot pay their entire debt should consider debt settlement instead. Credit consolidation is usually a good idea only if you can afford to pay off a majority of your debt. Only pursue a debt consolidation plan if you are serious about getting out of debt.
What Is Debt Consolidation?
Many believe debt consolidation is only a method of debt relief through lower interest rates. You can also consolidate your debts with a third-party debt relief service who can also reduce the amount of principal you owe. Unsecured debts are eligible for consolidation regardless of your credit. Student loans are only eligible to be consolidated on their own through the original lender.
Why Does Debt Consolidation Work?
Consolidating your debt through settlement can give you the immediate relief you need. Say you have a credit card that has a 15 percent interest rate. A $10,000 balance would cost you $1,500 a year just in interest costs. Penalties and late fees can cost you even more each month.
Home equity loans usually have an interest rate of 5 percent or lower. You first use your home equity loan to pay off your credit card debt. The home equity loan will then be paid off over a certain amount of time. You will pay about $500 a year in interest for the first 12 months. The amount of interest you pay will decrease as you pay off the loan.
But is it worth risking your home for your credit cards?
Other types of consolidation options are balance transfers and unsecured consolidation loans. Unsecured loans for those with bad credit also exist. You should take a look at your current financial situation to determine whether consolidating without a debt relief service is a good idea.
You cannot borrow your way out of debt. Sorry to be blunt but you have not been able to manage your existing credit card loans up to this point so why do you believe a credit card consolidation loan is the answer to your debt problems?
We want to help you reduce and eliminate your unsecured debt NOT roll it into another loan. We believe this it the best way to make debt consolidation in California work.
Are You Serious About Getting Rid Of Debt?
The major pitfall of consolidation loans is not taking advantage of your new loan terms. Some people see debt consolidation loans as an excuse to rack up new debt. This will just lead you back to the negotiation table once again.
Continuing to rack up more debt will make consolidation less effective in the future. Missing debt payments will lead to a lowering of your credit score. A lower credit score will make it less likely you would qualify for any type of equity loan or credit card balance transfer.
Negotiation and settlement of your debt is only for those who are serious about getting their debt under control. Any debt relief plan should be accompanied by real changes to your financial habits. Learning how to stay out of financial hardship is much easier when you know how to effectively manage your money.
Finding A Credible Credit Relief Company Can Be Hard
Most debt relief services will attempt to charge you for services before they are rendered. Other companies may try to charge you fees simply for maintaining your account throughout the debt relief process.
The worst trick is done when your credit counselor shows you a lower monthly payment. What they don’t tell you is the loan has simply been extended over a longer period of time. Your hospital bill that was due to be paid off in six months will now be paid off over an entire year. All this will do is force you to pay more interest over the term of the loan.
Debt relief agencies may have relationships with major creditors. This may create an arrangement where the creditor pays the credit counselor a certain percentage of any debt that is not forgiven. You then have to pay a fee equal to a percentage of debt that was forgiven. Your credit counselor gets paid twice for doing almost nothing for you.
Reducing your total principal balance legally is the way to consolidate your credit cards. Finding a debt relief company that has your best interests at heart can be hard. Even when they do, can you afford the fees they will charge you? The best advice is to work hard to change your financial habits. Working harder to pay down existing debts could be all you need to do. Call now to see what we can do for you. Calling us right now can give you more information regarding debt consolidation in California and all over the country.