If you're living beyond your means, you're bound to find yourself in debt. Getting a firm grip on your finances is difficult but not impossible and with some discipline anyone can do it. Debt consolidation is a term that could have different meanings in different contexts. So let's define debt consolidation as it generally applies.
When debt is out of control and you can't handle your bills, there are couple of options available to consumers. One of the very common one is "credit counseling". There are numerous agencies out there that are involved in credit counseling. In simple terms, credit counseling is a debt management plan that helps you get out of debt. Debt management plans help you consolidate your unsecured loans in to a single monthly payment that you send to your credit counseling company and it then forwards it to your creditors. Now you would wonder why don't you just send the payment yourself and why do you need a routing agency.
First of all, research indicates that in most cases, getting professional help can actually change your "credit behavior". And believe it or not, if your credit behavior is not changed, you'll end up in debt again down the road, so there are some advantages of seeking professional help. Credit counseling agencies will force you to stop acquiring new debt. they will also force you to give up your credit cards.
Credit counseling companies work with your creditors to bring down your payments. Most bank and creditors will work with consumers that are willing to work at paying off their debts. Most debt consolidation services will get your creditors lower your monthly payments, reduce or eliminate interest and help you control your financial future. Also remember that most Debt consolidation programs are not loans. They offer a service that negotiate with your creditors to work out a better payment plan. Credit cards usually have high interest rates between 14% and 29%. If you continue to make minimum payment, it will take most of your life to completely pay off their credit card debt. By utilizing a debt consolidation service, your creditors will see that you're actively involved in eliminating your debt and will reduce your interest rates. This is a win-win situation for everyone involved.
Credit counseling, however, is not without its costs. One downside is that your reduced payment plan will probably show up as a mark against you on your credit report. Even though your creditor agreed to the reduced payment, you technically did not pay your account as called for in your original credit agreement. You might run into more problems if you end up with a credit counseling agency that is only interested in making quick bucks and scamming consumers. Also, most credit counseling and debt consolidation companies are out there to make money. Even the non-profit ones have to pay for their employees and operating costs.
To get your debt management plan to be successful, you will have to find a reputable credit counseling company. You should read their reviews on online credit forums and contact the local better business bureau(BBB) in the area where company is located. You can also check with national groups such as Association of Independent Consumer Credit Counseling Agencies(AICCCA) or the National Foundation of Credit Counseling(NFCC) to see if the service you're considering is a member of wither group. If you can't find anything, last resort is to ask the agency itself for references. But sometimes, it is better to find a another credit counseling firm rather than relying on the references provided by the agency itself.
Also make sure that you understand everything about the debt consolidation process and how debt management agency will fit in the picture. They should answer all your questions and should provide you the cost up front. If you're uncomfortable with their response or feel that something is not right, don't sign up with that agency. Last thing you want is to get more problems related to money and your credit. Another piece of advice is to consult your close family members. It is not uncommon to have your judgment clouded when you're in financial trouble so make sure you make your family part of the decision making process.
If your debt load is high but still under control, you might want to take steps to make sure it doesn't get out of hand. these steps don't require you to contact a credit counseling agency and with a discipline approach, you can make them work. These popular debt consolidation loans are very popular so let's take a look at their pros and cons.
 Home Equity Loans
Line of Credit
Zero Percent Credit Cards
Debt Consolidation Loans
|
