There are numerous methods of dealing with debt, but the most overlooked and misunderstood is debt consolidation. There are many myths and half-truths that can often mislead those in a financial crisis. The following article has compiled some great tips to help you get started with consolidating your debt and making your financial future a happy one.
To consolidate your debt, try taking out a personal or signature loan. This has become a limited option due to the credit crunch, however. Many lenders that used to offer unsecured, signature loans for consolidation do not anymore. If you find one that offers this option, be sure it’s not a high-interest loan, even if it helps you lower monthly payments by extending the terms.
Don’t make any decisions on a whim. Seriously, you’re talking about your personal finances here, something that will affect the quality of your life in many ways. Because of this, real research is needed. Understand what got you here, learn about your options, and fully research the debt consolidation firms you are considering.
Find out whether a debt consolidation company is a “home equity loan” provider in disguise. Some debt consolidation companies really just want you to take out a home equity loan. Don’t let this be you. After all, your home is the most important thing you have. If you find out a company wants you to take out a loan on your home, move on.
Make sure that the money you pay through the company, to your creditors, actually goes to them. In the case of agencies that are not on the up and up, occasionally some of that money will go toward their random “fees” instead of to your creditors. This is obviously a situation you want to avoid.
Before deciding to go through debt consolidation, get a credit report. A credit report will allow you to see where you need to concentrate your efforts. A credit report allows you to see how much you owe and what creditors you owe money to. Additionally, many credit reports also show the interest rate of each loan.
When you are consolidating debt, you must try to renegotiate with your creditors. Whether you are choosing to try and do this yourself first or have enlisted the help of a debt consolidation company, renegotiation is key to saving you a lot of money when paying off your debt.
If you decide to enter into a debt consolidation agreement with a company specializing in such arrangements, make sure the terms and amount of your recurring payments are set to a level that you can realistically honor every month. The last thing you want to do is start missing consolidation payments, as that basically defeats the entire purpose of your decision.
If you’ve got a very spotty credit history, understand that the loan rates you’ll get from any bank will be relatively poor. You may be denied a loan, or the interest rate that’s offered may be extremely high, 20% or more. You may need to look for professional help if this is the case.
Pay off your smallest loans first. Then concentrate on large amounts. Using this technique allows you to quickly get some small bills paid off. Then, you can use the money that you had been paying towards those small bills to help pay off larger loans. This technique works well when you are saddled by a lot of small credit card balances.
If you think debt consolidation will allow you to go back to your old ways, do not use it! You cannot use this method just so you have extra money each month to blow on dining out or going to the movies. Only use it if that extra money will go towards other debts, such as grocery bills.
Taking a personal loan from someone in your life is a form of debt consolidation. Although, this is risky for the relationship if you never pay the money back. Only borrow money from someone your know if you have no other options.
Fill out any documents you get from debt consolidators properly. You need to give this task your full attention. Mistakes on your application can lead to denials of loans, so make sure that everything is correct.
Carefully consider location when you are choosing a debt consolidation company. While you should check certification and licensing anyway, remember that not all states require licensing. Two of these states are Florida and Maryland. So, if the company you’re considering is in one of these states, proceed with careful caution.
Debt consolidation can work for you if you know how to take advantage of the process to suit your needs. There are many pros and cons, as well as companies out there preying on the less fortunate. However, just by reading this article, you are on your way to living a life with less debt.