Being in debt can be debilitating. Most people can find it to be continually overwhelming, depressing and impossible to get out from under it. Even though you may not feel like you have any options left, you may have overlooked debt consolidation.
Check out a credit report before seeking debt consolidation. You need to know how you got into debt. You need to know your debtor and the amount you owe. In order to get your financial picture back on track, you will need to know how to distribute the money.
Just because a debt consolidation is non-profit does not mean it is your best option. Just because an organization is a nonprofit, it doesn’t make them competent. Check out any company by visiting your local Better Business Bureau.
Do you hold a life insurance policy? If so, consider cashing in your policy and using the funds to pay down your debt. Your insurance agent should let you know how much money you’d be able to have against your policy. Your policy may have a cash value which you may borrow to help pay debts.
Sometimes it’s possible to lower your debt by making a few calls to your creditors. Many creditors are happy to help debtors who are trying to pay off their debt. If you have credit cards and the monthly payments are too high, speak with the companies involved to negotiate a lower rate. Many times these companies are willing to work with you because they would rather get some money than lose it all.
Interest Rate
Examine how the interest rate for your consolidated debt is calculated. The best option is a fixed interest rate. With a fixed rate, you are positive about your costs for the entire loan life cycle. Be aware of any sliding interest scales. They end up getting higher and higher, leaving you unable to pay.
Don’t borrow from pros that you don’t know anything about. There are many different types of unscrupulous loan providers. If you must borrow money, work with someone who has a strong reputation, offers a fair interest rate and has easily understandable repayment terms.
You might access your retirement funds to repay high interest debts. You’ll need to repay the money to your retirement account though, so make sure you take that into consideration first. You will be required to pay tax and penalty if you cannot.
Figure out which of your debts should be consolidated and which should remain as they are. If you have debt on a charge card that doesn’t charge interest, then it wouldn’t make sense to switch it to one that has a higher rate of interest. You and your counselor should evaluate each loan individually.
Ensure that you’re working with a reputable debt consolidation firm and the counselors are certified. Agencies such as the NFCC ( National Foundation for Credit Counseling) can recommend reputable companies with qualified counselors. This can help you do the proper thing to start with and deal with qualified and professional people.
Individualized Payment
You’ll want to check to see if the debt consolidation company will provide individualized payment programs. Your situation is going to be very different from someone else and the company should take that into account. Look for a service that offers you an individualized payment plan instead. You will end up spending less over the long haul even if the initial cost is higher.
Get documents filled out that you get from debt consolidators the correct way. You should be paying extra close attention to all of this information and detail. Errors can only result in a delay, so be sure to fill out the papers as completely as you possibly can, and ask questions if you need to.
Negotiate with your creditors before trying debt consolidation. For example, you can call your credit card lender and ask for a better interest rate on the condition that you stop using it, or ask to be placed on a fixed rate if you are currently on an adjustable one. They might just give in to your demands!
Discuss all fees that will be owed to the debt consolidation company. They should be able to show you exactly what you will have to pay. The debt professionals shouldn’t be taking money until services are performed. Therefore, don’t give them any money ahead of time.
What has caused you to acquire too much debt? This is the first thing to understand before moving on to debt consolidation. You might end up in debt again if you do not improve your financial habits. Isolate the issue, solve it and move ahead with repayment.
When trying to crawl out of the financial mess you are in, debt consolidation may be your ticket to happiness. The important thing is to learn about this process and how it can be the tool to dig your way out of debt. There’s plenty of useful information right here, so give the suggestions presented above a try.
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