consolidating debts Archives - Illinois Debt Consolidation Quote

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.

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.