How do you get out of debt?
It’s a question that most of us face at one point or another in our lives, whether through necessity or choice.
Debt consolidation has become one of the most popular ways of tackling debt problems, and it’s good that this is because it can work.
First you need to know what is debt consolidation which is nothing but clubbing multiple debts into a single amount or payment to enable you to clear it at a less interest rate.
The key is to make sure you use debt consolidation to tackle your debts, not other things like debt advice or even bankruptcy.
Don’t be tempted to use debt consolidation as an ‘escape hatch’ from your problems. The debt consolidation may relieve you temporarily but it does not solve the underlying problem. If you are not disciplined with your money then you’ll be back to square one sooner than later.
In the long run it can be cheaper to pay off your debts than to pay off bankruptcy and most of the time your debts will be discharged at a lower cost.
When should you consolidate debts?
Your main goal when consolidating debts is to get lower interest rates. This may not always be possible. If you need lower interest rates, you should look for ways to consolidate debts. The reasons for this are many. Here are some reasons that may apply to you:
1. You have too many creditors. This may be due to lack of attention to your debts. There are not enough creditors to go through all of your debts in detail.
2. You have only few debts. You can pay off these debts through a debt consolidation loan and make just the minimum payments.
3. You have few debts. You can find a consolidation loan that covers more debts.
4. You have too many debts and you do not have the means to pay them off. If you have too many debts and you do not have the means to pay them off, you should consider the loan options.
By consolidating debts, you may save money with a loan option. You may also save money by lowering the rates. These benefits may also make it easier for you to make payments, avoiding the fee and extra charge. If you have below-average credit, you may even get an unsecured debt consolidation loan that does not require collateral.
So how do you use debt consolidation to solve your debt problems?
Get out all your loans together and either transfer them to one loan with a better interest rate or get a consolidation loan which comes with a lower interest rate.
See how much you can afford to pay towards your consolidation loan per month. If you find that you can afford more, then negotiate with your creditors to allow you to pay more or lower the cost of your consolidation loan.
Negotiate with your creditors to reduce the rate of interest that you are currently paying on your loans and other debts.
Don’t get carried away with this but do keep trying until you get an agreement that gives you a good deal. Many times your creditors are so desperate to get their money that they will reduce the rate of interest for you. However this can be dangerous as it will stop you from paying your debt.
Once you’ve got an agreement with your creditors, then do the same with your consolidator.
If you have a good rate of interest with your consolidator, then your consolidator can charge you a little higher rate, but if you pay them first, then you pay them both together.
The process of debt consolidation is extremely easy. You only need to fill in a form and decide upon a debt consolidation company to help you. This way, you may get the relief from debt as well. The process starts after you decide upon a company. Once you are convinced, the company comes for the negotiations with your creditors. The negotiations end in a settlement figure or amount for repayment of all your debts.
You need to pay this amount immediately. The company gives you a loan to repay this amount. You may go for different loans, like personal loans, secured loans, and home equity loans. You need to pay the installment in monthly installments to the lender. The interest rate you pay is also variable.
The company negotiates with the creditors, in order to reduce the interest rate. This reduces your monthly payments. With the help of the consolidation company, you may clear off all your debts in a short span of time. Once the bills are paid off, you need to clear the debts in easy monthly installments.
But, debt consolidation doesn’t come free. You need to pay the service fee of the company. The service fee is not very high. It ranges from $25 to $75. But, sometimes, the company charges a bit more. This is because they are desperate to recover the money. If you ask them to clear your debts at zero, they are willing to charge some extra amount. But, if you can clear the bills in easy installments, the company doesn’t need to charge anything. You can also look for personal loans to pay the service fee of the company.
However, the main motive of the company is to help you clear the debts. But, you may get a free debt consolidation if you can provide some collateral. Collateral may be your house, your car or any valuable assets. The company will hold the assets until the debt is cleared. Then, they can be released at zero.
If you have many kinds of debt, then getting a debt consolidation would be a good option. In case you have poor credit rating which is below a FICO score of 670 you may have to think about various options you have. Fortunately, the are some lenders who have specialization in consolidating debt and make you come out of this situation to quality for a loan. This means that if you have below-average credit but you have plenty of debt and you need help with a debt consolidation loan, you can get that loan.
First, you must be up to date on your payments. If you are behind on payments or you are behind on your payment agreement, you may not be considered for a debt consolidation loan. Therefore, you must be current on your payments to be eligible for a debt consolidation loan.
Second, you must have a minimum of $10,000 in total debt. That amount may be determined by the amount of your secured loan amount or the amount of your unsecured loan amount. Since a secured debt consolidation loan has a lower interest rate than an unsecured debt consolidation loan, you may be eligible to use the difference between the interest rates in the contract to consolidate your debts. If you do not, you will end up paying more in interest than if you did not consolidate your debts in the first place.
So, if you have below-average credit but you have a lot of debt and you need help with a debt consolidation loan, you may be able to get it. So, if you have below-average credit but you have a lot of debt and you need help with a debt consolidation loan, you may be able to get it.
In most cases, you do not want to consolidate debts because you are only getting them low interest rates. In the long run, this can cost you more and make the debt more complicated. If you are in a situation where you cannot make even the minimum payments on your debts, there is not advantage to consolidate debts.