As much as people don’t want to have debt, being in it can be depressing. Many people do things they would never have considered until they face financial ruin. Debt consolidation may be a more benign option, and is discussed in the tips below.
Before going with a debt consolidation agency, make sure they are qualified. Are they properly certified? Do they have certified counselors and a reputable history? Checking into this is an excellent method of learning whether this company is worth using.
Consider the long term effects of your debt consolidation decision. You need to deal with your debts today, but you need a company which will continue to work with you into the future. Many companies offer services that will show you how to avoid financial problems after you’re debt free.
Are you on life insurance? You may want to cash your policy in if you wish to pay some debts. Talk to your insurance agent and see what the cash value of your policy could be. Sometimes you’re able to borrow some of what you’ve paid in.
At times, filing for bankruptcy is necessary. Any bankruptcy, whether Chapter 13 or 7, will leave a lasting ding on your credit reports. But, failure to make payments on your debt consolidation arrangements will also spoil your credit profile. You can decrease debts and work towards financial comfort when you file for bankruptcy.
Debt consolidation programs generally are there to help, but some may be scams. If something appears too good to be true, then it is most likely exactly that. Ask the lender a bunch of questions and be sure they’re answered prior to getting any kind of a contract signed.
Retirement Fund
You can pay off the higher interest credit cards via some money from a retirement fund or 401K plan. This should be done only if you know you can pay the money back into your retirement fund. If you can’t pay the money back then you’re required by law to pay a penalty and tax.
Find out if the debt consolidators you’re using are certified counselors. You’ll find companies that you can trust through the NFCC – the National Foundation for Credit Counselors. By doing this, you can feel better about the people you are working with.
A good way to consolidate debts is to secure a personal loan. Before you do so, however, carefully consider the impact that such a loan could have on your friendship, particularly if you run into trouble paying it back. This is a way to actually pay down debt, but it really ought to be a last resort. Only go down this road if you know how and when you can pay them back.
See if the debt consolidator will customize payment programs. A lot of companies just use one program for all of its clients, but avoid this because your situation may not fit into this program. Try finding a company that uses personalized payment plans. While this might seem more expensive, it actually is going to help you get where you need to be.
Ask about the debt consolidation agency’s privacy policy. It is important that you are aware of how they store your private information. Question whether or not their computer system has encrypted files. The more secure the system, the less chance your identity will get stolen.
Develop a working budget. You should pay special attention to the way you are spending your money. By understanding the amount and ways you spend money, you will be better prepared to get yourself out of debt.
No matter what timeline a debt consolidation company provides to you, aim for a payoff within five years. A five year plan gives you enough time to pay the debt off, but a longer plan would be a lot more expensive because of the interest adding up.
Credit Report
Don’t let lenders get a copy of your credit report just yet until all terms are agreed upon. You do not want to have too many people access your credit report, since this can lower your credit score. Be sure to make this clear as you talk to the lender so they know you are serious.
Before you take out a loan, consider if you actually already have the equity or access to credit you need to pay off some of your debt. For example, if you’ve gotten some credit on a home, you might be able to withdraw some equity.
Borrowing money from a loved one can help you consolidate your debt. This may be simpler for paying back debt once a month. You could negotiate a more favorable interest rate, which would lessen the amount needed to pay back.
Debt Consolidation
Keep in mind that consolidating your debt does not mean you’re eliminating it, it simply means you’re trading in the many payments you’re making a month for one payment. Essentially, you’re still responsible for the same amount of debt. Making bad choices in debt consolidation leads to more debt and stress and could cost you more in the long run. The consolidation could mean a life long paying cycle, something that could be alleviated with proper debt management. If you do not want to go through a debt consolidation agency, you can call your creditors and negotiate a settlement on your largest balance. Work through your creditors systematically from highest amount owed to lowest to create your own debt consolidation plan. Eventually, you’re going to pay your debt totally, rather than a credit counseling service.
Some people get so despondent that they end up making bad choices when they are buried under debt. This is something that does not have to happen and shouldn’t even be entertained. A highly-qualified debt consolidation professional will help you start solving your financial problems.
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