Are you swimming in debt? Instead of letting this situation overwhelm you, look for an efficient solution. Debt consolidation is one option to consider. Continue reading to find out how debt consolidation can help you.
Read through your credit reports closely. They can help you understand the depth of your financial problems and reveal patterns to help you see where you went wrong. That way, you are unlikely to make the same errors again after you have straightened out your finances.
Do you hold a life insurance policy? If so, consider cashing in your policy and using the funds to pay down your debt. Talk to the insurance agent to see what you could obtain against the policy. You can sometimes borrow a part of what you invested in your policy to pay your debt.
Some people automatically trust companies that are labeled as non-profits, and that shouldn’t be the case. Even scammers will use this term to try to suck you into their web with loan commitments and interest rates that are way too high. Go with a group that was personally recommended to you or look at the BBB.
It is imperative to fully research your financial options along with verifying the reputation of any loan consolidation company that you are planning to sign up with. 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.
Are you the owner of a life insurance policy? Cashing out your policy can help you eliminate some of your debt. Call your insurance agency to see if you can cash in your policy. Sometimes, you can borrow part of what’s invested in the policy to help pay off debt.
You may decide not to consolidate all of your debts. If you already have 0% interest loans, you don’t want to consolidate them. Go over every loan you already have out with a lender to be sure the decisions you are making are smart ones.
Let your creditors know if you’re working with a credit counselor or debt consolidation agency. Some creditors will work with you to lower your interest or adjust payments as necessary. This will help to take the stress and tension away from your life. If they are aware that you are working hard to repay the money they are owed, they will likely be more willing to help you.
Borrowing money from your 401k can help get you out of debt. This allows you to borrow money from yourself instead of turning to a traditional bank for a consolidation loan. It is a little risky, though, as you’re borrowing from funds you’ll likely need in retirement.
Look at how your debt consolidation interest rate is formulated. A fixed rate of interest is usually your best option. This will allow you to know exactly what’s going to have to be paid during the loan’s life cycle. Variable rates are nothing but trouble. Often, they’ll lead to you paying much more for your debt over time.
Debt consolidators need to use personalized methods. If the agents don’t spend the time to get to know you and your situation, look for a different agency to use. There is no one-size-fits-all plan for debt.
Take out loans for outstanding debts and call your creditors in order to negotiate a type of settlement. Most creditors will allow you to pay a lump sum of 70 percent of your balance. This doesn’t affect your credit in a negative way, and in fact, it can increase your score.
The “snowball” strategy can help you pay off your debts without a loan. Pick your highest interest rate card, and pay it down as fast as you can. Use the savings from that missing payment to pay down the card with the next highest rate. This is a valuable option that you can benefit from.
Ask a friend or family member for a loan if you can’t get a loan anywhere else. Specify exactly when and how the money will be repaid and honor that promise. Avoid ruining your relationship with a loved one at all costs.
Ask about the debt consolidation agency’s privacy policy. You need to know how they store your personal information. Be sure encrypted files are used. If you find anything lacking, then you may be putting your financial information (and your identity) in jeopardy of being stolen in the future.
If you need to eliminate debt and feel desperate, you might borrow from your own 401k. This lets you borrow from yourself instead of a financial institution. However, understand that you could be negatively affecting your future by doing so; give it careful consideration.
Do you think debt management could be a better option for you? If it is possible for you to pay debts off relatively quickly on your own, the full cost will be lower and you will attain financial freedom faster. Find a company that will contact your creditors to negotiate better terms and lower interest rates.
Instead of a debt consolidation loan, consider paying off your credit cards using what’s called the “snowball” tactic. This is done by paying off the credit card with the largest interest rate. Take what you’ve saved from having that one less payment to pay off the next card. This is a valuable option that you can benefit from.
One monthly affordable payment to satisfy your debts is the goal of debt consolidation. Paying off your debt in five years is ideal, but you can negotiate both shorter and longer terms. This helps you set the right goals and an expected time for becoming debt-free!
See if there are individualized options for payments within the debt consolidation company that you like. Your situation is going to be very different from someone else and the company should take that into account. For best results, choose a consolidation company that offers custom tailored payment programs. It may appear as though this would be more expensive, it will actually help you to save money later on.
A good debt consolidation company will offer help on how to handle finances, create budgets and avoid future financial mistakes. If they offer any classes or workshops, register to them so that you can learn advice on resolving your debt in a smart manner. Choose someone else if the company you are looking at does not offer this.
Inquire about a privacy policy. See how secure your personal information will be. See if they’re using a computer system that’s encrypted. If they tell you no, realize that your credit card details could be exposed to hackers.
Interest Rates
Talk about fees upfront with your debt consolidator. They should present you with a detailed fee structure for their services. They have to perform a service before asking for any pay. Avoid any company who ask for money upfront before the services are performed.
If you’re having to pay more than one debt off, figure out how much the interest rates are on average. Compare the number with the proposed interest the agency offered to be sure debt consolidation is for you. You may not want to consolidate your debt if your interest rates are low.
Before using a debt consolidation company, be sure you ask about their fees. These fees must be explained and in your written contract. Make sure you inquire about how much each creditor will be paid each month. A good debt consolidation outfit will be upfront about the repayment schedule they intend to employ, showing you how much is going to which creditor and when.
“No” is a powerful word. You can ruin your budget just by going out for one night on the town. Instead, you should inform your friends that you are attempting to resolve your debt and that you would appreciate not being pressured into going out to eat, shopping, or to the movies. Instead, ask them if they would like to hang out with you at your place.
Choose a company that is within your geographic location. Several states don’t require companies to be licensed or accredited to operate. This is why you should be sure that the company isn’t headquartered in these places. Finding this information should be pretty simple, and you will be glad you took this step.
When you have a list of possible companies, check www.BBB.com for complaints. You can find companies that have offered good service, and bad.
When taking out debt consolidation loans, no matter the timeline, try paying it off within the next five years. The longer you wait, the more interest you pay and the less likely you are to pay it off at all, so come up with a five-year plan and stick with it.
You have many options when debt is involved. If you think debt consolidation is the correct pursuit for your needs, utilize what you’ve read to guide you through the process. Many people have used debt consolidation to get on the right financial path.
Keep in mind that making your payments through a debt consolidation service will not improve your credit score while making payments directly to your creditors will count toward your credit score. It can quickly help you pay down your debts, but there will be a footnote added to any credit report stating that a debt consolidation program was used.