The debt consolidation industry has grown in leaps and bounds over the past couple of decades. If you are in over your head with excessive debt and are considering bankruptcy, it is advisable to look into debt consolidation as an alternative. Debt consolidation involves the pooling of all of the smaller, individual debts you owe into one larger ‘consolidation loan,’ allowing you to make only one – hopefully affordable – payment and to eventually pay them all off.
While debt consolidation can seem like a debt relief dream come true to someone stressed with money issues, there are some caveats. Debt relief is almost always a better alternative than bankruptcy, however there are potential pitfalls you need to be aware of. As with any pursuit, an informed consumer is one who will win out in the end. Let that be you!
Here are some tips to consider as you navigate the debt consolidation information available to you:
- Keep in touch through this process. Although the last thing you may want to do is speak with your creditors, it is important that you maintain your reputation with them. Call each of them and explain your situation, and that you will be consolidating your debts in order to ensure you can pay them. Some creditors may even wish to negotiate with you individually, so you may want to make these calls as a last-ditch effort before you go through with the consolidation. Perhaps with a few phone calls you can have some of your interest rates or payment amounts lowered, and avoid debt consolidation altogether.
- If you find it necessary to take the next step, debt consolidation is almost always preferable to bankruptcy. This is in large part due to the fact that your credit rating – otherwise known as your financial report card, and used by potential lenders and employers as a way to judge your creditworthiness – is not adversely affected by a debt relief loan. If done right, your credit report will show the history of someone who makes good on their debts and does whatever it takes to pay them off. Bankruptcy, on the other hand, effectively ruins your credit for the next 7 to 10 years, depending on where you live. You will have little chance of receiving credit cards, loans for purchases such as cars and houses, etc., with a bankruptcy on your credit history.
- Not all debt consolidators are equal. Some truly act in your best interest, and others don’t. Shop around and ask around. Check with everyone you can think of who may have some knowledge in this area – your financial advisor, lawyer, and friends and family. Get referrals. Even though you may be embarrassed, ask at your bank as well – they will be able help you find a reputable debt consolidation company, and they may even offer you options you didn’t know you had. No one wants to see you go under, and most banks, especially in today’s financial climate, will want to keep their valuable customers.
- When dealing with a debt consolidation company, always read the contract they wish you to sign, including (especially) the small print. Just as some credit card companies will tell you in small print that should you be late on a payment your interest will skyrocket to 30%, some debt consolidation companies are in the business for the ‘suckers,’ and you can end up even worse off in the long run if you’re not careful. This is not to say you should not go forward; it is merely a warning to know what you’re getting into, as you should with any contract you sign. Contracts are legally binding documents, and you are giving your word – legally – that you will not only make payments as promised but also fulfill any obligations should you miss payments. It is these obligations which you should read carefully – they could be steep and get you into trouble. Be sure you negotiate payments you can handle to avoid sticky situations.
- In order to clear your debts – and your mind – as quickly as possible, consider ways of making extra money to pay off the loan. If you don’t already have one, you may have been searching, but your mindset before this debt consolidation was likely different; searching for a job when you are feeling fearful and desperate is different than looking when you are feeling in control of your financial future and positive. The faster you can pay the loan off the better, of course, and if you have a set loan amount ie. cannot pay it off faster, you can begin a savings program which will make you feel even more fabulous – in control and looking forward to the future as you deal with the consequences of the past.
- As a final tip, remember that you are not your money. You can change your habits, but you must look honestly at how things got this way. Are you a sucker for those department store credit card offers? Stop it. As they say, if you are deep in a hole and want to get out, the first thing is to stop digging.
No matter how challenging your situation, the best things you can do are to take responsibility and look to – create – a better future by changing things for the better. You have more control than you may believe, and when you seize it and begin to use it, you’ll feel better and better. Good luck!
Watch the video related to debt consolidation
Opening a debt consolidation business requires the appropriate training as a liability specialist, registration with the appropriate reporting agencies and ample advertising to build up a clientele. Star a debt management company from the ground up withmoney advice from a registered financial consultant in this free video on personal finance. Expert: Patrick Munro Contact: www.northstarnavigator.com Bio: Patrick Munro is a registered financial consultant (RFC) with outstanding sales volume of progressive financial products and solutions to the senior and boomer marketplace. Filmmaker: Reel Media LLC
Help answer the question about debt consolidation
Credit card debt consolidation companies, Anyone know of a good one?I've become over whelmed with my credit card debt and I'm getting those phone calls because I'm missing payments and such. Anyway I'm looking for a credit card debt consolidation company that doesn't screw people over, anyone know of any from experience or just know a good one?
If you have 10k in the bank, why not use half of it on your debt. That would make things much more manageable.
Then get yourself on a written budget and attack the other 7500.
Debt consolidation loans are usually a rip-off, extending loans way out and you end up paying a lot more in interest, plus the loan origination fees increase the amount owed.
Instead:
Transfer credit card debt to lower interest rate cards, some will give you 0% for a transfer. Do this before deciding which one has the highest interest rate to pay off first.
Pay at least double the minimum monthly payment on the credit cards and car loan. This extra will go entirely towards the principal, and reduce the debt a lot faster.
Pay off the highest interest rate credit card (or loan) first.
It is also a good idea to pay extra principal on your house, to reduce the interest and increase the equity.
Sell the car and get a used one that costs less if you have to.
Destroy your credit cards and don't use them again, instead get a credit/debit card that pays interest and cash back for any charges. So you make money when using it instead of pay money.
Here’s how you start to fix all these problems
Everyone.
Take that credit card and cut it up.
Call them and cancel the account.
Dont just stop useing it because they are working on a new penalty charge for “NOT USING” your card.
they will crap themselves when 40 million people call them up.. Then they wont have a choice but to fix it. Its as easy as that…
I declare March 1st 2010 the day we all call your card Co and take control.. pass it on.
I get this question a lot. I have personally reviewed over 50 different programs and have enrolled my credit cards in 7 of them just to test them out for the readers of my blog. Of the 7 I have tested, 2 of them have been Christian debt consolidation. It is virtually the same service but based on Christian principles. So, to answer your second question, I would say "yes" if you feel that sort of service will help you stay in the program and interact with the support staff.
Here is the best site I have come across:
ChristianDebtConsolidation.com
http://www.christiandebtconsolidation.com
Having a domain name that cannot simply be bought for $8 on Godaddy should be the first indicator that the site is legit.
Try this site
http://Best-Financial-Consultation-USA.info
Here you can find the best debt settlement specialist that available in your area for free
Most of the debt repair/consolation/settlement companies want their fees up front and leave you credit trashed.
Check nfcc.org for listings legit non-profit credit counseling services. They can help you set up a budget and work out clearing up your debt.
You can tackle your debt yourself by putting every extra penny on the highest interest rate debt, while making minimum payments on the rest. When the highest is paid, move to the next, till they are all paid off.
It will take 2 or 3 years but if you work at it, you'll be out of debt with a good payment history.
Call the hospital and see if they have any programs that can help. Last month when I ended up in the ER with my gallbladder we got put on a payment plan where we only pay off $28 a month until the bill is gone. The surgeons office also worked out a plan where we actually only have to pay half of what the bill would have been (because my dingbat husband cancled our health insurance back in May *smacks head against wall*).
You don't need anyone to do it for you. All they do is negotiate your debts for you and collect a fee. You can do it yourself!
Call all of them and work out a payment plan and try to get your interest lowered or stopped.
Then, make the minimum payments on every one of them. On the lowest dollar value, put all your extra effort toward paying it off. Once it is paid off, then roll that extra money to the next largest balance. Continue this snowball until all your debts are paid off.
You proabbly need to cut your expenses back to the bare minimum. Get rid of cable, cell phones, internet, etc. Lower your electric bill, gas bill, water bill, etc. Don't eat at a restaurant until your debts are under control.
Try to increase your income by getting a second job. If you have a car with payments, get rid of it, and buy a good dependable used car for CASH.
Go to the library and get "The Total Money Makeover". Read it and follwo it carefully.
Go check out Dave's website as well.
http://www.daveramsey.com
Try this site
http://Best-Financial-Consultation-USA.info
Here you can find the best debt settlement specialist that available in your area for free
Stay away from any that charge a fee.
Most if not all of these companies will trash your credit.
What they do is not pay your creditors for months and then try and settle for less under the threat of bankruptcy. No special skills. They just don't pay.
Your creditors do not have to deal with these people because it is your debt.
Also, If they don't pay you creditors. You, and you alone are still responsible for the debt. Your creditors will sue you and not the company you hire.