Debt Consolidation - Advice and Tips

Everyone has heard of debt consolidation, but unless you were in need of these services, you probably never gave much thought to exactly what debt consolidation is, or what it entails.

We hope the information in this article will help to provide you with some much needed debt consolidation advice as well as a few tips and information you can use to get your financial situation under control.

Debt Consolidation – Where to Begin:

Before you do anything else, the first thing on the list is to order copies of your credit reports from all three credit bureaus.

You need to be able to sit down and take a good look at the complete picture so you can understand how you got into this position to start with. This will help you avoid making the same mistakes again.

There are many debt consolidation opportunities offering financial assistance. However, beware of any offers which suggest they can eliminate your debt completely for a one-time upfront fee. These offers are nothing more than a scam. Remember, when something sounds too good to be true.. it usually is.

Debt Consolidation Assistance – Where to Look:

Search out a licensed consumer credit counseling agency near you. These people can assist with your debt management plan by helping you to combine all of your accounts into one convenient monthly payment. Be sure to get all of your questions answered before selecting a company to assist with your debt consolidation.

Be sure to inquire as to the fees you will be charged for this service. A reputable agency should have no problem providing a detailed assessment of any fees being charged. Furthermore, there should not be any payment required until they have actually begun performing a service. You should not have to pay upfront fees just for setting up an account.

A good debt consolidation specialist should utilize methods that are personalized. If your counselor doesn’t take the time to discuss your financial situation and their main priority seems to be to get you signed up as quickly as possible, you need to shop around for another company. It is important that your debt counselor is someone who develops a personalized plan for you and your particular financial situation.

Is a Debt Consolidation Loan a Good Idea?

The easiest way to pay off debt, of course, is by taking out a debt consolidation loan. Do you own a home? Do you have equity in that home? You might want to consult several financial institutions about the specific interest rates you can qualify for. Make sure the terms of the loan will allow you to manage the payments in a timely fashion.

The monthly payment should be something you will be comfortable with, taking into consideration your monthly income as well as your monthly obligations. Agreeing to make large monthly payments, which may not be feasible over time will only serve to further damage your credit.

When considering a debt consolidation loan, you also need to find out how your interest rate is being calculated. An interest rate that is fixed will help you budget your money and make your payments on time. This helps you to know exactly what is to be paid throughout the entire term of the loan.

Consolidation Loans – How Much Do They Cost?

Beware of any debt consolidation programs with adjustable interest rates. This could present a problem. With fluctuating payment amounts you may actually be paying more over the term of the loan.

If you are not interested in applying for a debt consolidation loan, there are other alternatives you can consider. Do you have life insurance? Depending on the type of insurance, you may be able to borrow against your policy. Talk to your insurance agent about what options may be available to you.

Another alternative you may want to consider is the possibility of borrowing some money from your retirement fund or 401K. This could enable you to pay off your high-interest debt. This shouldn’t be done unless you are sure this money can be paid back quickly. You will have to pay taxes and fees as a penalty if the money is not repaid.

If all else fails, you may have to consider bankruptcy. If you are unable to make your payments on time, cannot qualify for a debt consolidation loan, you have no life insurance or retirement fund and you are running out of options, saving your credit rating at this point in time may no longer be possible. Filing for bankruptcy will allow you to start reducing your debt and get back on the path to financial recovery.

We hope this article has helped in offering a few suggestions as well as familiarize you with some of your debt consolidation options. It is important that you do as much research as possible on the subject before making any decisions. If you handle things right, your financial future will be much brighter.