Debt consolidation is something that many people choose to use when they have their debt spread out among many different debtors. This process can assist them in resolving their debt and repaying it. It terms of this kind of service, keep some key things in mind.
Find out if your debt consolidation agency’s counselors are licensed. Do they have any certifications? Are they backed by reputable institutions in order to prove these people are legitimate? You can determine if they are worth using to consolidate your debt if you know this information.
Find out if bankruptcy is an option for you. Filing for chapter 7 or for 13 will leave your credit score in poor shape. But, if you have no way to pay down your debts and you’re missing payments, your credit could be irreparable already. Bankruptcy is a good way to get rid of your debt and start improving your financial situation.
Get a loan to repay debts, and then discuss settlement offers with your creditors. Creditors often accept a lump sum of 70 percent. This doesn’t affect your credit in a negative way, and in fact, it can increase your score.
Interest Rate
When you consolidate your debts, consider what debt is worth consolidating and what must be kept separately. It does not typically make sense to consolidate a loan that you currently have a zero percent interest rate on into a higher interest rate loan, for instance. Look at each of your loans and then make a decision.
Your debt consolidating company should get to know you, your financial needs and create a plan tailored to you. If the professional doesn’t ask you questions about your situation and debts, you may want to look elsewhere. A debt counselor should work with you to come up with a personalized answer.
Inquire about a company’s privacy policy. Know what kinds of sensitive information they keep on file and how it is protected. Are they using encrypted computer files? If you find anything lacking, then you may be putting your financial information (and your identity) in jeopardy of being stolen in the future.
Always be fully aware of any fees and charges that will be charged to you for the services of a debt consolidation company. The fees should all be explained to you up front for any services offered. These professionals cannot collect anything until they actually perform a service. Never pay fees to set up an account with a company.
What is the address of your consolidator? Certain states have no licensing requirements that debt consolidation companies must have. For this reason you should check to see that the company isn’t in a state like that. You should be able to find that information fairly easily.
Keep in mind that debt consolidation agencies in Maryland and Florida do not require a license. Avoid doing business with companies in those areas. If you choose to use a company that is not required to be licensed, you could end up in some trouble with no legal recourse.
Put together a detailed list of who your creditors are and how much you owe them. Include the total owed, when it is due by, what interest rate you pay and the amount you pay monthly. This information is necessary when it comes to debt consolidation.
When taking out debt consolidation loans, no matter the timeline, try paying it off within the next five years. Interest adds up over time, and taking more time to pay back the loan means even more interest. Owing more could mean that you find yourself in financial trouble again, so set your goals on no more than five years.
If a debt consolidation company offers you a loan that just sounds too good, avoid it. Most lenders understand risk and charge a higher interest rate for people who are loaded with debt. If you are given a offer for a cheap loan, there are likely strings attached.
Debt Consolidation
If you happen to owe money to multiple creditors, try calculating your average interest. Then compare this rate with the one being offered by the debt consolidation agency to ascertain it’s a good deal. If you have interest that isn’t that high, then you may not need to use debt consolidation.
Debt consolidation is a great idea if you feel overwhelmed with payments. Use what you’ve learned here and you can get things back in order financially again. Your financial future is at stake!
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