Debt consolidation is there to help you immensely, but you need to know how to do it wisely. Overwhelming debt can put a huge cloud over your day-to-day life and your future. Consolidating your debt could be the answer. The following information can help you understand what debt consolidation is all about.
You can use your life insurance policy to get out of debt. If so, consider cashing in your policy and using the funds to pay down your debt. Contact your insurance agent to find out how much you could get against your policy. You can sometimes borrow a part of what you invested in your policy to pay your debt.
Talk to creditors if you’re using a credit counselor or debt consolidation agency. They may offer you different arrangements. Your creditors will see it as a good sign that you are trying to improve your financial situation. Plus, they realize that you are attempting to responsibly manage your debts.
Lots of people realize that their monthly payments can be reduced just by contacting their creditors rather than avoiding them. Creditors are usually willing to lower interests or charges if you let them know you need help to pay the money you owe. If you can’t afford a payment, call the creditor and discuss your situation. You may be able to negotiate a better deal.
Credit Card Company
It might be possible to withdraw money from a retirement fund or 401k to pay down high interest debt. However, you should only do this if you are certain you will pay back the money. If it is not, taxes and penalties may make this decision more costly than you thought.
Sometimes a simple call to creditors can help you get a lower payment. Many creditors will modify payment terms to help a debtor who is in arrears. If you have a credit card and cannot afford the monthly payment, call the credit card company and explain your situation. The credit card company may be willing to lower your minimum payment; however, they will not let you charge using the card.
If you are unable to get a loan, sometimes a friend or relative can help out. Be determined to repay it, though, and have all the terms in writing. You don’t want to ruin a relationship over money.
Bankruptcy may be a better choice for you than debt consolidation. A bankruptcy, regardless of type, will leave a stain on your credit report. Your credit is probably already terrible, if you can’t pay your bills and are missing payments. You can get your financial house in order by clearing the decks and starting fresh with a bankruptcy.
Negotiate your debt during the debt consolidation process, before you agree to anything. Ask your creditors if they can remove late fees or interests from your account so you can afford to make your payments on time. They may be flexible and willing to help you.
When considering debt consolidation, you need to research the consolidation companies through consumer reviews. When you do that, you can make a smarter decision, because you are more sure your finances are being taken care of by a reputable company.
Do you know why you’re in quite a bit of debt? Before you even consider debt consolidation, you must be able to pinpoint why you’re in this situation. If you’re not able to fix what is causing you to have this problem, then alleviating your debt isn’t going to really help. Find out what your problem is and work on improving your financial situation.
While debt consolidation can be a wonderful option, you have to be sure you’re not being scammed. Remember that if something looks like it’s too good, chances are it really is. Ask the lender a bunch of questions and be sure they’re answered prior to getting any kind of a contract signed.
Debt management may be a good solution to your financial woes. If you can quickly pay off your bills, you will pay less interest. All you need to do is work with a firm who will negotiate new, lower interest rates for you.
Retirement Funds
When consolidating debts, you want to have one payment that’s affordable each month. A solid five year repayment plan is something to shoot for, but you can go longer or shorter, as it all depends on your own situation and what you can afford. This will give you a goal to work towards and a predictable payoff time frame.
You can often borrow money from retirement funds to pay your credit card debt off. Do not consider this unless you know for sure you can pay back the amount withdrawn. Otherwise, the money is considered an early distribution of retirement funds, and you are on the hook for penalties and taxes.
If you’ve got a mortgage, getting it refinanced can help you keep from getting a debt consolidation loan. The money that left over from your mortgage payment reduction can be used to pay off debts that are outstanding. This may provide significant savings as opposed to consolidation plans.
After consolidating your debts, only use cash to pay for your expenses. You should use your credit cards as little as possible. If that’s the reason you got into debt in the first place, then you need to take control! Cash payments means that you are limiting yourself to exactly what you’ve got.
Do you have multiple creditors you owe? If so, calculate the interest rates for all of them and determine the average. This number can then be compared with the one that the debt consolidation agency is trying to give you so you can see if it’s the best option. If you’re already working with lower interest rates, it might not make sense to consolidate.
You cannot use debt consolidation as a quick fix for money issues. If you continue treating debt in the same way that got you into trouble, you’ll continue to struggle in the future. When you have gotten a loan to consolidate your debts, think about the changes you will need to make in order to improve your financial life, over time.
To emerge from debt, patience is key. It’s easy to create debt, but much harder to get rid of it. Sticking to your plan, getting a good loan and continuing to pay down your debts are the best ways to have financial freedom someday.
Consolidating your debt can help you get your life back. Phone calls from collection companies are probably something that you want to stop. This is when debt consolidation can help. Try some of the great tips in the article above to get on your way to being debt free.
Making your payments to a loan consolidator does not count on your credit score, but it will count towards the bills that are being paid. It can help you get out of debt faster, but a footnote will be added to your credit report to indicate that you used a debt consolidation service.