Dealing with many different debts is something that can be extremely stressful. That said, this dilemma is very common, especially those that are considering debt consolidation. Continue reading to learn more about how debt consolidation can help you.
Just because a debt consolidation company claims to be a non profit does not mean that they are are reputable or won’t charge you excessively. This term is often used as a disguise for predatory lenders and you could end up with very unfavorable loan terms. Therefore, be sure you do your research on this company beforehand.
Debt Consolidation
Always be aware of the method used to calculate the interest on your debt consolidation plan. The best thing to go with would be an interest rate that’s fixed. The payments will remain the same throughout the loan. With an interest rate that varies, you may end up paying more with debt consolidation than you would have paid without it. You may end up paying higher interest rates than you were before.
Refinancing your primary residence can often be the best option for providing money to pay off high interest debt. Mortgage rates are low right now; it’s the right time to take advantage of this method. In addition, you may find that refinancing may even provide a lower mortgage payment than before.
Call your creditors and ask if you can negotiate lower interest. Many will accept as much as 70% of that balance in one lump sum. This doesn’t negatively affect the credit rating and may boost your score.
An option to help pay off those credit cards with high interest rates is by taking some money out of your 401k. You should only use your 401K if you’re absolutely certain you can replace the funds. Income taxes and penalties will be due on money taken out and not replaced.
Look for a credible consumer counseling agency in your local area. These agencies will help you get a handle on your debt while combining everything into one manageable monthly payment. If you choose them over the companies that charge for debt consolidation, it will look better on your credit report.
When you consolidate your debt, be prepared to use cash to pay for things. You should use your credit cards as little as possible. You may notice that this was what got you in your current situation. Using only cash means you get only what you can afford.
Inquire of the privacy policy. See what sensitive information they store and how it is protected. Do they encrypt their files? If they don’t, your files might be available to anyone, which could lead to identity theft if their system is hacked.
Do you know why you’re in quite a bit of debt? This is the first thing to understand before moving on to debt consolidation. You need to deal with the cause, not just the symptoms. Realize what issues are causing this to happen, and move forward with becoming debt free.
The goal of debt consolidation is to have only one affordable payment scheduled each month. Paying off your debt in five years is ideal, but you can negotiate both shorter and longer terms. You’ll have a goal by doing this and you can come up with a reasonable time frame to pay it off.
Once you get together a list of the people you’re needing to pay, you should also write down what each debt is for. You should outline the amount outstanding, the due date, the interest rate and the size of your typical monthly payment. This information is essential to a debt consolidation plan.
Always read every little detail of your debt consolidation contract. A lot of these companies have hidden fees that you might not know about until it’s too late. You really need to get your debts lowered with this kind of a loan, and that’s why you should read the fine print.
Nobody wishes to struggle with debts all the time, but sadly, this is what a lot of people have to do. By leaning all you can about the pros and cons of debt consolidation, you will soon see that help is close at hand. Use the advice from above to get started with your debt relief.
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