debt consolidation loans

The DOs and DON’Ts of Debt Consolidation

July 17, 2014 by illinois

If you are looking to get rid of your debt, you might not have thought of taking out another loan. These loans, called debt consolidation loans, can potentially pull you out of a sticky financial situation. Below, you will find what you should and should not do when making this important decision.

The DOs

DO know your FICO credit score, and DO get your credit report.

Your ability to get a loan, as well as your interest rates, are based on your FICO credit score. The three credit reporting agencies of the United States, Experian, Equifax, and TransUnion, are required to provide you with a free copy of your credit score at least once per year. Below are the ranges for credit scores, and what they mean for you.

300 to 499 – Very poor credit.

500 to 579 – Poor credit.

580 to 619 – Low credit.

620 to 679 – Average credit.

680 to 699 – Satisfactory credit.

700 to 850 – Excellent credit.

If your score falls above the “average” range, it will be easier for you to apply for loans. This is because you have shown that you pay off your debts in time, and have probably never before defaulted on a loan.

DO keep in touch with your credit card company.

If you have a high credit score, make sure you contact your credit card company to see if you can lower your interest rates. You might be surprised at what they can do.

DO seek advice.

Credit counseling agencies are places that offer advice for rates that are typically low, and affordable for the average person. After making sure your agency of choice is reputable, you can go in, be assigned a credit counselor, and have another opinion on what to do next with you finances.

DO talk with your mortgage holder.

If you are having trouble paying your monthly mortgage, your mortgage holder may be able to help. If he or she has a good reputation, he or she can probably extend your payment term until your money is, once again, stable.

Another idea to consider would be refinancing your loan, which could lower your payments based on your home’s worth. It’s surprising how much money you could save, with just a short meeting.

DO get rid of debt.

One of the downsides to taking loans is debt, which should be paid as quickly as possible. If you feel it would be feasible, try to set the monthly payment on your loans as high as possible in order to avoid elevated interest rates and prolonged payment periods. Paying ahead of time, too, is a common action of many responsible loan holders. In essence, paying more in the beginning can save you hundreds down the road.

DO get the best deal.

Don’t just take the first offer you find. In order to find the best option, you might spend a few weeks “shopping around,” comparing initial payments, interest rates, and payment plans. Only make a final decision after you have examined the offerings of three or four different lenders.

The DON’Ts

DON’T neglect other options.

Before you sign a loan that holds a payment plan of seven to ten years, you might want to take a look at your current financial situation. If you’re not in a bad place, you might want to take into the thought the option of what banks call “snowballing” your debts, or paying them off as fast as you are able. To do this, you should pay as much as possible on the debts that have the highest interest, while only paying the minimums on those that don’t have as much. Some people who have done this have become debt-free in less than two years.

DON’T do balance transfers without research.

While your balance transfer card might offer a 0% APR at first, be aware that the rate could skyrocket to over 20% over the course of a few years. This is not a problem if you have paid off your balance before that time, however it could spell danger if you are not aware of the length of the low, introductory rate.

DON’T sign up for any management plans.

While getting a credit counselor is a good idea, don’t allow them to convince you to sign up for a debt management plan. These can often extend your payments to five years or more, and might cost you all of your credit cards.

DON’T take from your life insurance.

More often than not, pulling money from your life insurance could make for higher taxes and, as a result, more debt than the amount with which you began. Also, you are denying your beneficiary money that might be more than needed in the future.

DON’T get the wrong loan.

There are two types of debt consolidation loans: secured and unsecured. Secured loans, like second mortgages and home equities, are held by an asset that can be taken if you do not make your payments in time. Unsecured loans, like normal mortgages, do not put any of your property at risk.

In all, be wise about what you do and do not do with your debt consolidation loans. As long as you are willing to take the time to find the option that is the best for you, you can find yourself happy, free, and out of debt. Stay on top of your finances, in order to keep them from getting on top of you.

Cash Advance Debt Consolidation

February 23, 2014 by illinois

You might want to take out cash advance loans as they do seem like the right option for your cash needs on a short term. The claim of these loans is usually that they will help us in times of financial needs and that it will help you to save up some cash for times of needs but the truth is a bit different. These cash advances are really not as convenient as they might seem and they usually get you under high debts that are hard to pay off.

The Loan Debt Trap:

If you take a cash advance loan, you end up getting deeper into debt. The term debt trap means that you think you’re making things easier for yourself taking an advance cash loan but it’s a trap because in the end it’s also a debt. So you’re piling them on yourself. At the end you end up paying more than what you initially did.

High interest rates are the reason for making cash advance loans a debt trap. Cash advance loan needs a payback in a very little span of time like a about one or two weeks. On your final due date of the advance loan you have to pay back the whole amount plus the fee added. The high fee is tricky and difficult part.

Different lenders have different free. Most of them have like thirty dollars on every hundred dollars you lend. As per the lenders demand, this fee varies mostly in range between $10 – $30 for every $100 dollars. Dome lenders have higher rates unless they are stopped by legal authorities.

A range between 300%-800% is the annual average interest for these cash advance loans in most states. If you don’t pay the full amount you pay the fee and extend your repay a week or two.

Getting out of the trap:

Once you have ended up with some cash advance loans you start thinking about how to get out of it and balance your financial situation. Cash advance loans have full repayment at once which makes it differ from credit cards and some other types of loans.

Luckily there are solutions available to get you out of this hard condition. The first step towards getting things right is by cash advance debt consolidation.

This procedure starts with discussing with the creditor. Because of the very high amount of fee it is likely that in the end of payback of your loan you pay more than the total amount of the loan. At that time, you will need someone to help you out getting back on track.

Cash advance debt consolidation through discussion begins with requesting for lower fee and a step by step repayment plan. Payday lenders are required to accept this request and accept a gradual repayment plan for you. So you can get the situation on uphill from here by professional negotiation.

Negotiations can proceed with making a payment plan or lessening interest by requesting a settlement. A settlement works by requesting a lesser principle amount. With loans, you are prone to wind up paying great past the beginning rule regardless of the possibility that you repay it back in two months. Settlement can help you figure out how to clear the debts without further inconveniences by making an arrangement that makes the loan affordable

Benefits of Consolidation and Settlement:

As soon as you decide that cash advance debt Consolidation and settlements are the best solution for you, you will start getting benefit from it.

The most prominent benefit is that you get debts that’s are more affordable and will help you get out of this whole scenario. for instance if you have fallen for a debt trap promising quick cash you need help to get out of that. Consolidation and settlements will help you to get out and beyond of the debts while the solutions remain affordable for you.

Another advantage is that your credit score gets higher. You will definitely have to start working hard on maintaining a good credit score but as soon as you start the settlements, the rating will start increasing and improving almost at the same time. a negative effect if there for a short time period and will eventually improve with every month that passes. When you get the debt pay backed you can start focusing on other bills that’s will start making your score better and improve.

Cash advances can no doubt be difficult to cope up with once they get huge and out of control. But for your advantage, there are two things named as consolidation and settlements which can help your situations and in the span of a short time all you’re problems will be solved and hence you can be debt free of cash advance loans as well as other debts you may be under.

Legitimate Debt Consolidation Loans?

February 9, 2014 by illinois

There are a number of agencies that advertise the ability to consolidate and reduce debt. We have all seen the commercials with customer testimonials that boast how a debt consolidation loan saved their credit and even their home. When you are facing mounting debt and struggling with credit issues, these advertisements are enticing. However, these loans are not necessarily viable options for everyone.

Legitimate debt consolidation loans are only found through investigation because there are predatory companies that make big claims and can cause more financial strain than assistance. These companies will charge high and unnecessary fees and make following the program nearly impossible.

Debt Consolidation Programs

The most common method of debt consolidation is that you take a loan from a participating lender with lower interest rates than many of your other debts and make one payment over an established period of time. The money is used to pay off the current debts. Legitimate debt consolidation loans are often offered by a local credit union or banking institution. A good credit score is usually a qualification for these types of loan facilities.

Another option is a peer-to-peer lender such as Lending Club or Prosper. These are organizations where individuals fund the loans. These are ideal for those who have high interest debt with large balances. Many people face credit card debt with 20%interest on $10,000 balances. These loans are offered at a much lower rate that would prevent you from damaging your credit over slow or late payments and would save you money in the long run.

The debt consolidation loans that are commonly offered by private institutions and debt relief companies are the loans where the agency settles your accounts and pays the debt for you. These are called debt repayment plans and you must take care when investigating a company that offers this service. Legitimate debt consolidation loans with these companies involve you making one payment made out to the institution and they distribute the money among your creditors. These are controversial but there are reputable organizations out there.

The third way to manage debt is to open a new credit card and transfer all of your credit card debt into the new account. These cards are typically 0% interest for 12 to 18 months and they can help give you a chance to pay down the debt without increasing interest fees. It is important to read all of the fine print and understand the introductory guidelines for these programs. Should you have any questions, ask a financial advisor before committing to such a program. These work best if the debt can be paid off before an interest rate will be added to the account.

Secured Loans

Legitimate debt consolidation loans can be either unsecured (as the previously mentioned programs suggest) or secured. A secured loan is one where you must have collateral that is of some value. Homes are commonly used for collateral and due to the high risk these loans usually come with a lower interest rate. The risk is great because the lender reserves the right to collect the collateral on any defaulted loan. This means that if you run into problems making your payments, poor health or job loss, then your home could be foreclosed upon and you would lose the asset as well as accrue fees for financial recovery.

Restoring your credit and paying off high interest loans are crucial to financial success. The less money paid in high interest or expensive, unnecessary late fees are money that can be saved for retirement or a child’s college fund. Good credit has become very important in our society. It not only determines your interest rate on credit cards or major purchases such as cars and homes but it is also used to regulate rates on things like insurance and sometimes even utility discounts. There are many companies that require their employees to have an average to above average credit rating in order to work in their company. Credit scores are becoming identifiers and it is important to maintain a healthy credit score.

If you decide to go with a legitimate debt consolidation loan then it is important to put a plan into place that will prevent financial decay for the future. A budget should be created and managed and it should be re-evaluated as needs change. Once we clear out bad debt we begin to feel tempted to find ways to run up more debt. The biggest change needs to come with how you manage your money. Take time to evaluate what got you in the position that you needed to choose debt consolidation and indentify ways to better handle your bills and create a plan for emergencies. There are financial advisors that can assist you with making a reasonable and workable plan for money and debt management. Dedication and commitment to the plan will aid in your financial freedom.

Understanding Debt Consolidation Lenders

September 18, 2013 by illinois

It is important to look for debt consolidation lenders before you have any credit problems to get the better deal. The idea is to group all your existing debt into one payment, and that payment should reduce the monthly payments that you are making. This will make paying off your debt cheaper. The interest rate should be lower meaning that the total overall debt will be reduced than if you had done nothing.

To get the best rate from a debt consolidation lender then you need to have a great credit report, this will ensure that the loan that you are offered will have the lowest interest rate possible.

What Is A Secured Loan?

A secured loan is a loan that is tied to an asset; it can be a car or your home. If you fail to pay the loan then the debt consolidation lender can sell that item to pay off your loan. If it is your home then you will find yourself homeless and it will not matter if the value of the home is higher than the debt, they are just looking to recover the costs and you will not be entitled to the difference it will be sold off. It is possible for your home to be sold off for a fraction of the amount that it is worth.

What Is An Unsecured Loan?

An unsecured loan means that you do not have to lose the possession of your home or car if you default on the loan. But what you will face is higher interest payments. The risk is higher that you will default and this is then reflected in the rate of interest that will be offered if you are accepted for the loan. The better your credit report the lower the interest rate that you will be offered.

Being Approved

It is important to realise that if you are looking for a consolidation loan that the companies are going to think that you are having problems with your loans at the moment, meaning that they are going to see any consolidation loan as a higher risk loan.

The debt consolidation lender will look at your position carefully and will need to assess if you can afford the loan. It will delay the time that it takes for the loan to be processed. They will want to study your credit report to see if there are any problems that could indicate that you are a high risk of default.

You might be asked to provide some information and this can include:

The last few years tax return
Financial statements from your bank
Application for credit
Proof of your income

They will want to know about ay debt that you already have including:

Credit card debt
Personal loans
County court judgments
Car loans
Mortgage payments or rent

It is possible that if you are approved for the loan that they request certain conditions that will need to be adhered to otherwise you might be asked to repay the loan sooner. Those conditions can relate to the closing of credit cards after they have been paid off.

The debt consolidation lender must prove that they have taken your circumstances under review and that you can afford to pay the loan and that they haven’t made your financial situation worse than it already is. This is called due diligence and is sometimes used as the reason for the credit being rejected.

Bad Credit

It is possible to obtain a consolidation loan even if you have got a bad credit report. It will reflect badly in your circumstances and it will mean that you will need to pay higher interest rates than if you had a great credit file. It will have a negative impact on the product that you will be offered. You will need to check that the loan will pay off all your debts and will be cheaper than if you continued paying them individually. It has been known that a debt consolidation loan to have higher interest rates than what you have got already. So it is important to have this information to hand and to make sure that the product that they are looking at offering you will in fact save you money each month and not make the situation worse.

Make sure that the company that you choose to do business with is a respected company and that they are going to help you. Some companies are better at helping than others and it is important that you are able to research the company to find the best one for you.

Therefore if you are considering getting a debt consolidation loan that you have all the information from your debts so that you can compare the product that is being offered. You are looking at reducing the payments and the interest that you are paying.

Understanding Debt Consolidation vs. Debt Settlement

September 2, 2013 by illinois

When you have gotten behind in your bills, putting off those payments mean fees and increase in amount owed. This is how one gets into debt. When your debt is overwhelming, many people look into ways to get rid of their debt. Two of those ways are debt consolidation or debt settlement. If is important to compare debt consolidation vs. debt settlement to determine the best for you.

Debt Consolidation vs. Debt Settlement in Loan Removal

There is a big difference between how the companies handle the debt. Both companies do remove debt from your credit report.

Debt consolidation has two main options regarding how it deals with reducing your credit. You can choose to make payments to your debt relief company and they will split that into each of your creditors. The other option is to pay all your debts at once through a low interest loan and only have one payment due per month.
Debt settlement is different in the aspect that you negotiate a reduced payment for your debts. You or a settlement company can negotiate with creditor to reduce your payments. At which time you can make a lump sum payment, or paying off the left over debts quickly.

Debt Consolidation vs. Debt Settlement on Credit Score

The credit score troubles you have with extensive debt will be changed when using either of these debt relief approaches.

Debt consolidation tends to have a balancing effect when it comes to your credit score. When you take out the consolidation loan you will be effecting by adding a debt. However, as you close the other account, with a paid off status, you will gain some points back. Here is where the balance came in, you will become in good standing quicker and it won’t reduce your score much.
Debt settlement can be a huge hit to your credit. When the accounts care labeled as “settled” this is a negative mark on your score. This can make you unable to gain new credit for several years. There is however subprime credit designed for those with bad credit and trying to recover or regain a positive credit score.

Debt Consolidation vs. Debt Settlement and Interest Rates

One of the biggest things that add to your overall debt is the interest rates. Usually with consumer or credit debt your interest rates are extremely high.

Debt Consolidation offers the possibility of reducing your interest. With debt consolidation the credit counselor will negotiate on your behalf with the creditors to reduce the interest rates. The credit counselor can also help you to find a low interest loan if you choose that option.
Debt Settlement has the ability to reduce the interest that is paid. As debt settlement reduces the total cost that you’re paying, therefore it will reduce the amount of interest paid. You’re able to settle a reduce amount that can include reducing the amount of interest that needs to be paid.

Debt Consolidation vs. Debt Settlement Programs

When you’re looking at the different programs available there are some facts that you want to consider about each type of debt relief.

Unwanted calls from creditors: With each program there is the possibility of stopping those calls. The debt relief company that you choose will try to negotiate in order to stop all collection activities; however the creditors are legally allowed to contact you.
Maintain my privacy through the proceedings: The answer is yes. Both through debt consolidation and debt settlements you’re able to maintain privacy.
Taxes: When you pay off things or purchase large things you can sometimes be penalized or required to pay taxes. With debt consolidation there are no extra taxes that one is required to pay; however you may be asked to pay taxes on any amount that you have been forgiven of when going through a debt settlement.
Program Fees: There is no set fee structure that is to be followed. So no matter which program that you participate in the fees will vary. However some fees you might see in the case of debt consolidation are enrollment fees, representation fee, monthly fees, even the possibility of a closing fee. Debt settlement is a bit different because you will home more one time fees rather than monthly. For example you can have a success fee, or negotiation fee depending on the services that you use.

Each person has different reasons for being in debt; each person has different ways of getting out of debt. The same is true of debt relief programs each one is different, and each company is different as well. Be sure to choose the program that is right for you and ask questions be sure to know all the facts about the program and the company that you choose.

Debt Consolidation Loans in Illinois

August 10, 2013 by illinois

The problems with the economy including unemployment, cut backs to working hours and the reduction in house values in many areas has made it difficult for many people to keep their finances on track. There has been a lot of debt put onto credit cards over the last few years and this has reached a point that people are having trouble keeping up with the level of debt that they have accumulated.

Debt Consolidation loans in Illinois are a way that people can help to get their finances in better shape. There are many different forms that these loans are available in so you need to be careful to consider the positive and negative aspects of each type of loans so that you make the appropriate choice for your situation.

Types of Debt Consolidation Loans Available in Illinois

The traditional provider of loans is of course the bank and they can offer loans to you particularly if you have prior history with the bank you apply with. Let’s look at the positives and negatives of a bank based debt consolidation loan in Illinois.

Low interest rates with a range of terms that are very favorable when compared to most other lenders.
Will be unlikely to loan without security if you do not have a good credit score and clean credit history.
If they rate you as a credit risk then they will not offer low interest rates.

Credit unions are less conservative than banks and are able to still offer reasonable rates even on unsecured loans.

Less stringent than most banks and are prepared to accept more risk.
Interest rates and terms are much better than those paid on credit card debt which is the largest problem most people in financial distress need to deal with.
Have more experience with debt consolidation than banks so can be a better option.

Pay Day Lenders have rapidly expanded business as they use advertising and the ability to get smaller loans quickly.

Fees and interest rates are high and penalties if you are late or miss a payment can be crippling.
Terms are very short and while they might be useful in an emergency if you are already in debt then they can be more harmful than helpful.

Debt Consolidation Lenders are specialist businesses that will offer you a consolidation loan that pays off all of your high interest loans such as credit cards.

Will deal with people that have a bad credit history.
Rates vary with risk and can lower payments considerably.
Gives you a single monthly payment making budgeting simpler.
In some cases you can end up paying significantly more than the original debt because of the term of the loan needed.

Alternatives to Debt Consolidation Loans in Illinois

There are a number of alternatives that people can use that involve the help of an organization that is skilled in the area of helping people get their finances into better shape. Here are some of the top alternatives to debt consolidation loans in Illinois.

Financial Counseling agencies are non-profit organizations that help people to repair their finances. They normally have budgeting information and can refer people to other agencies or educational courses if they are required.

Can help to negotiate with the companies that you have debts with.
Provide advice on ways to improve your finances.
While they are non-profit this does not mean they are free and normally have similar charges to for-profit organizations.

The final alternative to debt consolidation loans in Illinois are Debt Relief Companies. As their name suggests that are specifically set up to provide debt relief for people that are having financial problems. They operate in a similar way to financial counseling agencies with a range of options that they can use to help you get into a better financial position. The two main alternatives are listed below with information about how they operate.

Debt Management Plans are plans that the company constructs once they have all of your financial information and debt commitments. They will contact your creditors on your behalf and try to negotiate the best possible deal to pay the creditor back quickly and to fit within the confines of the debt management plan.

Provides step by step assistance in making a plan that will have your debt paid as quickly as possible.
Creditors see you are serious about paying your debt and will usually provide debt relief companies with favorable terms with reductions in interest rates, longer terms and forgiveness of fees and penalties.

Debt Settlement is an alternative to people that may be looking at bankruptcy. The debt relief company will take a mutually agreed monthly payment and attempt to negotiate with creditors to take partial payments to satisfy your debts.

An alternative to bankruptcy.
More acceptable to many creditors.
Allows people to rebuild their finances quickly once they get back to a better financial base.

How To Keep Late Penalty Fees From Piling Up On Your Credit Card Debt

May 28, 2013 by illinois

One of the enemies that will keep you buried in credit card debt are the late penalty fees. There are many reasons why you can be late on your payments. You may have forgotten them or mixed them up with another account’s due date. Or you simply do not have enough money to pay off all your minimum requirements and thus you had to default on some of them.

Regardless of the reason behind defaulting on payments, one thing’s for sure, you can expect an average of $35 to be added on your next month’s bill. That amount plus your current balance will be the basis for the interest amount that you have to pay on top of that sum. Sounds unfair right? Well that’s how credit card companies get rich.

So here’s the solution: never be late on your payments. Do not waste anymore of your limited resources in paying extra towards your credit card. It’s easier said than done but there are ways to help you achieve this – and it goes beyond merely being organized.

Debt consolidation is a great way of making sure that you will never have to pay for late penalty fees again. The single payment plan that you will be subjected to will keep you from confusing one payment for the other. In debt management, you get to work with a debt counselor who will literally manage your debts for you.

At the beginning of the program, you will come up with a debt management plan that is based on your payment capabilities. You will enjoy a lower monthly payment because your current debt will be stretched over a longer plan. When this new plan is approved by the creditor (which usually happens because there is no actual debt reduction), you get to make a single payment towards your debt counselor. They will take charge of distributing your payment to the different creditors you enrolled in the program. They will make sure that the payments will come on time – thus eliminating late penalty charges.

On the other hand, if you use the other method of consolidating debt, you erase the late payment fees because you completely pay off your credit card debts. Debt consolidation loan involves applying for a loan that is big enough to pay your other debts. Once paid off, you will concentrate on this one loan – thus making payment a whole lot easier. If you use a personal loan, you can get a low interest rate if you have a good credit score. This will help make your monthly payments smaller. But if you do not pass that requirement yet you possess a collateral, you can get a secured loan – which is ideal for the low interest that it provides borrowers.

These are great options to make sure that your debts will no longer increase because of late penalty charges. Of course, practicing proper financial management is also a good habit to develop. These include budgeting, saving and making smart purchases. If you practice this, you can keep your finances in order, boost your financial safety net and you will keep yourself from making your debt payments worse.

What Is The Process Involved In Debt Consolidation Loan

May 19, 2013 by illinois

Sometimes, all it takes to be debt free is to find a systematic way of paying it off. The come-what-may attitude may get you deeper into debt and no where near your financial goals.

Any debt relief program is systematic. With debt consolidation loan however, you have to be careful because there is no professional assisting you unlike the others. This is why you have to know the process before you can successfully use it to your advantage.

First of all, you need to be able to make the minimum payment – or at least, only have a small deficit to it. Once you conclude you are able to make minimum payments, here are the steps you need to take to make debt consolidation work on your favor:

Step One: Self Realization
Accept the fact that you are in debt and figure out how much you really owe. This is a crucial step for you to move forward. You need to tally all the payments you are making monthly to find out the amount you are paying off on a monthly basis.

Step Two: Do the Math
Once you know the full amount of monthly loan payables, look at the nature of each for interest rates paid and if there are any prepayment penalties in the the event that you pay off your loan. This is a good decision point if getting a debt consolidation will be beneficial for you. It will also guide you in shopping around for the best lender.

Step Three: Explore the Lender Market
You need to look for a credit lender that will offer the best deal for you. But do not send out too many applications. This could and will backfire on your credit score. Shop around trustworthy recommendations or do the research on your own. A lower interest rate offered by a lender might lead to savings for you down the stretch. Prepare income documents as well because this will be the basis of lenders in taking a gamble on lending you money. They need to be convinced that you have the ability to pay off your loan.

Step Four: Go Back to the Main Objective
Once you find the right lender at the best rate, remember your main goal in choosing debt consolidation – to pay off all your debts and to manage one payable a month. It is much more simpler to remember one payment a month rather than juggling five debts each with different due dates, different interest rates and different penalties. As soon as you get the funds from your lender, pay off all your loan and close all credit cards. You can choose to keep one open in case of emergency.

Step Five: Pay Off the Debt
This is too important that reminding you again seems just right. You might have the temptation to use the money elsewhere. This mentality will get you deeper in the red.

Step Six: Do an Attitude Check
Probably the clincher of all the steps and another crucial understanding is attitude adjustment. Look at how you got into paying a lot of debts in the first place and steer away from that mentality. You might think that you now have less payments because you are just paying one debt a month. Falling into this false sense of security might encourage you to spend again and again. The next thing you know is you are in a lot more debt than from the time you started debt consolidation.

These steps will help you make the most out choosing debt consolidation loan in achieving a debt free lifestyle.

Choose The Right Consolidation Method: Loans or Debt Management

April 5, 2013 by illinois

Consolidating your debt is a great way to get out of debt without putting too much negative effect on your credit score. In fact, people think about this method long before they research on the different debt solutions that they can opt for.

Sometimes, people only need to organize their debts to make good progress in paying it off. Having more than one debt can get to be confusing to the point that you start missing out on payments. Good news is, there are two types of consolidation methods that you can choose from. Each of them cater to a specific financial situation.

Both of them will allow you to make single monthly payments. Not only that, the goal of both options is to make your contributions smaller. However, you need to understand that there will be no debt reduction for any for them. Despite the lower monthly dues, you will still end up paying for the complete amount that you owe. Because of that, a steady and stable income is an important requirement. If you know that your finances cannot afford this and you need a bigger reduction on your debt as a whole, choose another debt relief option.

To discuss their differences, let us begin with debt consolidation loans. This debt solution involves getting a significant loan amount that is enough to pay for your other debts. When you have paid off your other debts, you can concentrate on this one loan payment every month. Since a typical loan is spread out over a couple of years, you can expect that your monthly payments will be smaller compared to your previous arrangement. Another thing that can help is the type of loan that you will get. You need to target a low interest loan by having a good credit score or a collateral. Both of these will make you a low risk borrower – a qualification that will prompt your lender to give you a low interest rate.

But if you do not have a good credit score or a collateral, you can opt for the next debt consolidation type – debt management. This debt solution involves enrolling with a debt management company. They will assign a credit counselor to help with your debt troubles. They will use their expertise to analyze your finances and come up with a debt management plan that will serve as your guide. You need to provide them with accurate financial details to make sure that you will come up with a payment plan that you can afford. Once this plan is completed, the debt counselor will show it to your creditors to negotiate for a lower monthly contribution. This can be done by stretching your current balance over a longer payment term and negotiating for a lower interest rate. The former is usually approved but the latter request will depend on your creditor’s good graces. Once approved, you will send a single payment to the debt counselor who will take charge of distributing your payment to the different creditors on your debt management plan.

In choosing between the two, you have to identify the qualifications and your specific financial capability. If you will choose debt consolidation loans, you have to exert more control because you will take care of your own payments and you will monitor your own progress. In debt management, you get the assistance of a debt counselor who will remind you of your payment obligations. Of course, you need to pay the service fee but that is never over $50 a month.

The key to stay out of debt, however, is applying proper financial management practices. Most debt management companies have these to offer so your chances of learning the ropes to maintain a debt free life is more likely to happen with this option. But if you have the patience to research and learn on your own, you can save on the service fee every month and just opt for debt consolidation loans.

Is Debt Consolidation All You Need?

March 22, 2013 by illinois

Debt has been part of civilization ever since it started. When barter was the still the accepted norm, people would owe items from other people in exchange of goods or services. When currency was introduced, a lot of credit tools were built around it to extend its purpose to people who cannot afford it at specific times but has the ability to pay sometime in the future. There is nothing wrong in incurring debts, the challenging part is making sure you are able to fulfill your financial obligations.

There are a couple of solutions you might want to consider if you are already in a financial bind with all your debt obligations. But what most people fail to realize is the fact that there are debt solutions that would work wonders even if you are not yet neck-deep in loan payments such as debt consolidation.

Being at the forefront of debt relief options, debt consolidation works best for people who are able to meet their minimum monthly debt payments. It is only at this circumstance are you able to maximize the advantages of debt consolidation. It is because this solution requires you to have the ability to meet monthly payments on all your debt obligations – if only needing a small reduction of the amount. Take note that the reduction is not on the total debt amount. It will only be stretched so as to distribute payments over a longer period – thus the lower monthly dues. If you are unable to settle even one of your loans monthly, consolidating your debts might not be a good idea.

This works best with unsecured loans like credit card bills. The idea is to merge all your payables under one account. Say for example you have three credit cards that you use for grocery, clothes and home improvement. Debt consolidation can basically mean transferring all three payables under one card. It would help if your choose the lowest interest rate among all your cards. Or it can be getting one but loan to pay off all of them and thus concentrating on only one credit account.

The idea is to combine all your debt under one card and make one interest payment instead of three. It frees you up on some extra dollars that you can also put into payment to save on interest payment and pay off the debt earlier as well. This is not just for credit cards but other loans as well such as medical bills and payday loans.

Debt consolidation can also include your house mortgage but it requires a lengthier process. If you have a stable income and confident that you can make your monthly payments including your mortgage, you can opt to take out a second mortgage on your home to pay off for all your debts including your mortgage.

The only set back in debt consolidation is you might have the false sense of security and belief you are paying less obligations. Although this might be true, this could lessen your vigor in making sure that you meet your obligations and even convince you that you can make unnecessary purchases again.

Debt consolidation offers a solution to your debt problem and if done correctly, could offer financial freedom a lot faster than you have initially thought of. It just requires discipline and hard work as you persevere in paying off your loans.