For anyone who is in debt, they understand just how depressing it can be. Financial problems can cause people to make mistakes and poor decisions. However, debt consolidation could be the light at the end of your tunnel.
Lots of people succeed at lowering payment obligations with a simple call to creditors. Many creditors work with debtors because it’s better for them to get some amount of payment than nothing at all. If you cannot afford the minimum payment on your credit card, call the company to explain your problem and they may allow you to lower the minimum payment, but will discontinue the use of your card.
When signing up with a debt consolidation company, you should make sure that the workers there are qualified to do their job. Counselors should have a certification from a professional organization. What is their education and training? This helps to determine the legitimacy of the company and whether or not it’s worth pursuing.
You can get a loan taken out so you can pay off your current debts. Then you’ll be able to speak with your creditors so you can see if they’re able to settle with you. Many creditors will accept as little as 70 percent of the balance in a lump sum. This tactic has no adverse effects to your credit score; it can in fact improve your credit standing, especially if it frees you from making delinquent payments.
Never select a debt company simply because they claim non-profit status. Non-profit does not equate to good business practices. If you’re trying to learn more about a company, you should always look them up using the BBB, or Better Business Bureau.
If you’re looking into debt consolidation, you’ll need to carefully determine which debts need to be consolidated. 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.
Interest Rate
A well-qualified consumer credit counselor can help you make the best decisions for your financial situation. They can teach you how to control your spending while also consolidating your debts. This won’t hurt your FICA score as significantly as other methods might.
Look into exactly how the interest rate is determined. The best option is a fixed interest rate. It is then clear what rate you are being charged for the life of the loan. Try to steer clear of adjustable rate solutions. This can cost you more in the long run.
See if your prospective company employs certified professionals. The National Foundation for Credit Counseling is a great place to check first. This will ensure that you are dealing with a knowledgeable company that has employees who have the proper training and certification.
If you’re a homeowner, consider refinancing your house and using the cash to pay off your debt. When mortgage rates are low, you can use this method to consolidate your debt. Often your mortgage payment can be lower, compared to what it used to be.
After consolidating your debts, only use cash to pay for your expenses. You don’t want to get into the habit again of relying on your credit cards. That’s probably what happened to you in the first place. Paying with cash mean you only pay with the money you have.
When you’re going through the debt consolidation process, understand what got you into this mess. You wouldn’t want to wind right back up in the same situation prior to going through the debt consolidation program. Find out what went wrong so you do not end up here again.
Don’t get debt consolidation just because you think you’re going to get short term financial help. If you continue treating debt in the same way that got you into trouble, you’ll continue to struggle in the future. Once you have found the right loan, take a hard look at your spending habits and make the necessary changes for a healthy financial future.
Sometimes, you can use your retirement or 401K money to pay for credit cards. Only do this if you’re sure you can put the money back at some point. Income taxes and penalties will be due on money taken out and not replaced.
If you are desperate to get out of debt, in terms of debt consolidation, you can borrow money against your 401k. In essence, you’re borrowing from yourself. Just remember that taking money from your retirement funds can be a risky action, so make sure you explore the pros and cons before choosing this option.
Some people get very overwhelmed with debt to the point that they make poor choices when they’re buried under it. This is totally unnecessary. You now know what you can do about your situation, so get out there and do it.
Prior to taking on debt consolidation, attempt to negotiate with creditors. Ask your creditors if they can remove late fees or interests from your account so you can afford to make your payments on time. You never know what they might offer you.