If you’re serious about getting your finances together, you should consider debt consolidation. When you put all of your debts together, you can start making headway toward a stronger financial future, and debt consolidation is one of the ways to do that. Here are some debt consolidation tips to help you out.
Before considering debt consolidation, review your credit report. You have to know why you are in this position to start with. This ensures you don’t take the same destructive path after you have eliminated your debt.
When consolidating debt, consider doing the footwork yourself. Consolidation companies may have fees associated with their services. However, you can easily make the same phone calls to your creditors and negotiate with them. There is no special consideration from the creditor about who calls, whether a service or you, the customer.
Check out different debt consolidation companies. While you may think they all do the same thing, that is not true. Each has their own different set of rules, regulations and fees. Before you sign up with any of them, make sure you compare them to find out which is the best for you.
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.
Refinancing your home could be a good debt consolidation strategy. Find a financial institution willing to refinance your home and take some cash out at closing. Use the cash to pay your debt off and make your mortgage payments on time. Compare the interest rate of your mortgage to what creditors are charging you.
If you own a home or land and have built up equity, you may qualify to take out a line of credit or home equity loan. These loans allow you to borrow against the equity of your home giving you instant access to cash to pay off your outstanding debts.
Attempt to negotiate settlements with your creditors before choosing debt consolidation. They may accept a lump sum which is reduced by as much as thirty percent! This will not affect your FICA score; it may even help it.
Understand the company’s rates and fees and know what type of rates are reasonable. A set-up fee in excess of a $100 should be cause for concern, for example. Similarly, a monthly fee higher than $50 is unreasonable. Call around to several different companies before settling on any one in particular.
If you make the decision to consolidate high interest debts such as credit card balances into a different obligation, do your absolute best not to begin racking up new debt until the consolidated amount is repaid. If you are doing nothing more than moving debts to different places while continuing to spend, you will not reap the benefits that debt consolidation really can provide.
Avoid debt consolidation agencies that pay their employees on a commission. A counselor who is motivated by a commission will be tempted to offer you more financial products than you really need. Find an agency that does not motivate counselors with commissions so you can get an unbiased opinion and useful advice.
Be sure your first talk with a credit counselor or debt consolidation agent happens for free. They should be able to do a preliminary analysis of who you owe, how the company can help you, and what options are available. If you cannot get a simple introductory session, look elsewhere.
It is important that you completely read over the documents that the debt consolidation agency provides you and accurately fill them out. It is important that you are paying attention during this time. If you give the company any incorrect information, it can delay the loan you so badly need. Be sure to speak up and ask questions whenever necessary.
What do you plan to do with the extra money you have each month once your payments are reduced? The best bet is to put it into a savings account. You never know when you might break a leg and need the money to pay off your medical bills, instead of going into more debt.
If you are going through debt consolidation, you really need to work with a debt settlement professional. These professionals will help you pay off your debt in a more timely manner as opposed to enrolling you in a debt management plan or filing for bankruptcy. They will help you preserve any credit that you have and start to rebuild any you lost.
Calculate how much money you can save thanks to debt consolidation. You will get lower interest rates on your debt if you use one of these services. However, the fees your debt consolidation agency charges you might be too high to justify using a debt consolidation service to get out of debt.
Prior to getting a loan taken out you should see if you’re able to take on some of the debt on your own already. You may have equity in your home that you can use to pay off your bills at a lower interest rate.
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 thinking about consolidating your debt, take some time to investigate the company that is going to work for you. Make sure that they are accredited before signing any contract. Reliable and reputable debt consolidating companies are always members of the Association of Independent Consumer Credit Counseling Agencies or National Foundation for Credit Counseling.
Now that you’ve learned a little about debt consolidation and how it can help you, start looking into ways you can get started. Use the information laid out here to turn you in the right direction and to provide a springboard for starting your own debt consolidation efforts. Keep your head up and your financial picture will improve.