Is Debt Consolidation for You?

 

    Debt can quickly get out of control and millions of Americans have faced debt problems at some point in their lives.  Being in debt can leave you sleepless at night and harassment by creditors day in and day out is just not fun. Worse case scenario is you can find yourself in bankruptcy.  Getting in is easy, getting out is twice as hard. It is time to look at the options available to you that best suits your situation.

    There are many debt consolidation companies out there and advertisement are all over the TV, radio, and internet.  There are so many ways out of debt and a reputable company will help you choose a program that is tailored to your income and your monthly obligations.  If you are drowning in debt, consolidation may work for you. Below we have come up with options that you can consider when choosing a debt consolidation program.

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You pay them down on your own.  

    If someone has told you it is impossible to pay off your debts on your own, don’t believe them.  It is possible to find the means to take care and eliminate all of your racked-up debt. You will need to knock them of one at a time.  Start with the debts with the highest rates and continue to make minimum payments on your other accounts until the account you have chosen is completely paid off. Then continue to the next.  This is called debt stacking and many people favor this option because long term this is the option that will save the most dough. This option could take much longer than other options, so this is a reason why most fail at self-pay.

    Another way to self-pay is using a method called snowballing.  Many experts like this method because you start knocking off more accounts quicker than the previous method because you pay your accounts off with the lowest balance first.  If your free up accounts quickly it puts more money in your pocket to pay off the larger ones as they come to the top of the list. This gains momentum for paying of the next card, then the next one, and so on.  Hence, the snowball method.

    Using these methods are known to work but it will require you to cut funds from other parts of your life to start throwing money at these debts.  If you and your family just cannot make such cuts self-pay might not be an option that suits your situation right now. A better option for you is to consider paying of your debt with debt consolidation loans.  You can do this with taking out a second mortgage with a bank or using a debt consolidation company. If you choose to take out a second mortgage it lengthens the time of repayment from 10-30 years and you will inquire a lot of interest throughout that time if you choose this method.  With a consolidation loan all of your creditor’s accounts will be consolidated into one monthly payment and it will be less than what you pay total for all of your accounts if you continue to pay them separately. You can also get lower interest rates and some of your penalties and fees could be forgiven.

Transfer your balances.

     If your wallets are chock full of cards with really high interest you may want to consider making balance transfers from cards with high interest to ones with lower interest rates or even 0% interest.  This will give you lower monthly payments and making the payments could be much easier because they are lower. Even if it’s just a couple of points lower of an interest rate it could mean hundreds, even thousands, in the end.

    If you can apply for a card with a 0% interest rate, many cards offer introductory rates at 0% if you can pay off the full amount by the end of the year, you will eliminate your interest rates entirely.  This will mean that you will have to be dedicated to cutting your funds and taking that money and throwing as much money at that debt to pay it off in a full year. Check the small print to be sure that there aren’t huge transfer fees to transfer from one card for another.  If the transfer fees are high this option could end up pointless.

Settle debts.

    To get away from lingering credit woes debt settlement is an option that can get you out of debt quicker than paying them off on your own.  This option is one that can lower the amount of debts you owe. You can try this option on your own or there are many agencies out there to help you.  If you attempt to settle your debts on your own, you should be sure to have the documentation to show your creditors that you are suffering from financial hardship and that it has made it impossible to pay off these debts. The best foot forward in negotiation is tell your lender that if they can’t work with you then your only other option is to file for bankruptcy.  Your lender would rather get some form of repayment than nothing at all. You will also have to have available funds to pay off the portion that you and your lender has agreed upon in one lump sum. 

   If your negotiation skills are not that strong you better prepare yourself that you will be up against some hard negotiators who do it for a living. You will have to be thick skinned and hold your ground.  Don’t let them bully you into thinking they can’t assist in your situation.

    Many people do not have the available funds to use this option, so a debt relief settlement company can help.  The counselor will negotiate on your behalf and you will pay your agency everyone month with just one payment. Your payments will go into an account and when you have paid in enough to knock off one of your settlement amounts the company will make the payment for you.

You should consider a debt consolidation loan

    Instead of going through the worry of settling your debts on your own, which is tricky and takes up a lot of your time, try using a company that assists you with debt consolidation loans.  Companies can negotiate settlements better than most people can by themselves because they have the knowledge and experience to do so. If you seek help with a debt relief company, you will find yourself agreeing to one monthly payment that best suits your financial situation.  Your payments are deposited in an account called and escrow account that you oversee. When your account reaches a limit where you can pay off a debt, your company will do it on your behalf. If there isn’t enough money in your account to pay off all your debts, then you will most likely be put in a payment program.  Many companies help you pay of your debts between two to five years. This is sometimes way faster than if you tried it on your own.

Beware! Beware!

    The worldwide web can be an excellent tool for many reasons but as good as it can be it is also full of many scam artists.  Years ago, the internet was chock full of companies that made huge promises, provided no repayment, and collected fees upfront and they would open, close, and reopen with different business names to trick people daily.  Although regulations have cracked down on a lot of these companies there are still some out there lurking in the shadows.

     It is very important that if you are looking online for a debt consolidation company that you do your research and make sure that the company you are entrusting with helping you settle your debts work ethically and are responsible in helping in debt relief cases.  Checking the AFCC’s (American Fair Credit Council) website is a great place to start.

    A company should be forthcoming and honest and take a fair amount of time explaining your program to you before you sign the bottom line.

     Debt consolidation loans can help alleviate the amount owed to your lenders.  When you join a debt relief program, you won’t owe another dollar until your settlements are paid in full.  If a company asks for your fees to be paid before your settlements are paid, run away. Don’t fall victim to these illegal tactics.

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