Debt Consolidation 101: The Tips You Need To Know

Do you feel overwhelmed by your debt? Do you need to get control of your financial situation? If so, debt consolidation may be for you. The information you’re about to read can help you with your debt consolidation. These great tips will get you headed back toward the peace of mind that comes with being debt free.

Prior to entering into consolidation agreements, review your own credit report. The first step to correcting your debt issues is to understand how they all happened in the first place. Make a list of all your creditors and find out how much you still owe them. You can only fix your problem if you know these things.

Be careful with the terms of collateral for any debt consolidation loan you apply for. Many times these types of loans will include a clause about your home, should you default on payments. Obviously, this could put you at serious risk should circumstances make meeting your loan payment difficult. Keep your home out of any loan agreement, and read the fine print.

To consolidate your debt, try taking out a personal or signature loan. This has become a limited option due to the credit crunch, however. Many lenders that used to offer unsecured, signature loans for consolidation do not anymore. If you find one that offers this option, be sure it’s not a high-interest loan, even if it helps you lower monthly payments by extending the terms.

When it comes to dealing with debt consolidation, make sure that you relax. This practice is very common and will help improve your finances when all is said and done. You have the opportunity to lower monthly fees, lower high interest, eliminate late fees, put a stop to those harassing phone calls, and eventually become debt free. You can bounce back from this, but you must keep calm and pay attention to your payment plan.

Get a debt consolidation company’s TOS (terms of service) in writing before making any decisions. It should have information about their fees and how long you will have to use their services. They should also outline what the benefits of using their company are. If you cannot get anything in writing, steer away from the company.

When dealing with a debt consolidation agency, it is important that you ensure their counselors are certified. Check the NFCC for a listing of licensed credit counseling companies. In this manner, you can be sure of getting solid advice and assistance.

If you have no other option when it comes to your debt, you may want to consider borrowing from your 401K. Borrowing from a bank or from another financial institution will probably cost you more than borrowing against your own 401k plan. However, understand that you could be negatively affecting your future by doing so; give it careful consideration.

Do not get involved with a debt counselor that works for a company that pays by commission. This is a red flag as it’s going to alter your situation according to the best interests of the debt counselor and not your best interests. Instead, look for a reputable company that pays their counselors accordingly.

If you are going through debt consolidation, you need to go through interest rate arbitration before you consolidate your debt. In this arbitration you could receive a reduction in your interest rate. This translates into lower monthly payments for your total debt. Gradually your credit score will also increase with on time payments as well.

Make sure the money you pay the debt consolidation company gets to your creditors. Follow up every month to make sure that your creditors have gotten a payment. Some debt consolidation companies tend to skim some of your payment to put toward various fees, but you need to make sure you know what is going on.

When going through debt consolidation, it is a good idea to have a debt management plan. This usually consists of getting some advice by seeing a debt councilor from credit counseling organizations. They will work on a budget with you where you can still afford to pay all of your bills.

When creating a list of creditors, don’t forget a single company or person. Include your car payments, mortgage, medical bills, overdue library books, student loan, utility bills, phone bills, cable bills, internet costs, magazine subscriptions, and anything else you might owe. Be sure to make a comprehensive list so that you can easily figure out what your next step should be.

Think about your long-term financial future. It’s easy to think in the short-term, as debt consolidation helps you almost immediately cut bills you need to pay on a monthly basis, but think about more than that. Ask yourself what you need to do so that your long-term financial picture looks good.

When you sign up for debt management to help you with your consolidation plan, know that you will likely have to close your credit card accounts as a stipulation the companies make in return for reducing your debt or interest rates. The counselor should let you know about this up front.

When using a debt manager to consolidate your payments, you will pay them a single amount monthly which they will then disburse to the creditors. Choose a management plan which allows you to pick the date on which you make your payment so it suits your financial situation the best.

If you can get an installment loan, your credit score will increase. These look very good on your credit report as long as you pay them off in full and on time. So not only will you be able to pay off your debt, but your credit score will go through the roof.

Look online for previous customer feedback before deciding on a debt consolidation company. A good company will have a website where previous customers can give their feedback. Even if they do not have reviews on their own site, a simple Google search should produce reviews of the best and worst debt consolidation companies.

As you’ve read, there’s lots to learn before consolidating your debt. This article has given you the basics so that you have someplace to start. Apply your knowledge and seek ultimate financial calm.