If you find yourself with a lot of debt, chances are that it is not just one type. If you attended college, you have student loan debt; if you have a car, you have car loan debt; if you own a home, you have mortgage debt; if you use your credit card a lot, you have consumer debt. And the list goes on and on. Most individuals owe numerous different creditors each month, which can be extremely overwhelming and unmanageable. That is where debt consolidation comes in. Debt consolidation is essentially just what it sounds like: a consolidation of your debts into one loan. It is an option for getting out of debt that entails taking out one loan in order to pay off many other loans. This may seem counter-intuitive, but it does eventually work to get you out of debt by lowering your interest rates and enabling you to pay one affordable monthly payment. This debt relief method can help to eliminate the following debts: credit card debt, unsecured loans, hospital bills, utility bills, and payday loans. If you have any or all of these debts, then a debt consolidation loan just may be what you have been looking for to get you out of debt.
How Debt Consolidation Works
Debt consolidation can be done in two ways: on your own, or with the help of a debt consolidation company. If you are interested in taking on debt consolidation on your own, then you will need to take out a debt consolidation loan from your bank or a credit union, and you will need to make consistent payments on this loan. Like most means of debt relief, you can tackle debt consolidation on your own, but it is also beneficial to illicit the help from a professional debt consolidation company. With the help of one of these companies, you will be given lower monthly payments and a lowered interest rate. This is because you will be instructed to make payments to the debt consolidation company instead of your creditors. The debt consolidation company will then in turn pay your creditors with the money you are sending them. Along with allowing you to make lower monthly payments, the debt consolidation company will also provide you with financial counseling, reduce the amount of collection calls that you receive, and set you up with a simple payment plan.
Is Debt Consolidation Right for you?
Well, let's begin by asking you a couple questions: are you unable to tackle multiple bills simultaneously? Do you often miss your payments? Do you make late payment frequently? Do you get creditor calls every day? Are you constantly short of cash? Are you using credit cards to pay your bills? – If you answered "yes" to any or all of these questions, then debt consolidation is most likely a good debt relief option for you. So, let's move on to the pro's and con's. Yes, all debt relief options have pro's and con's; it is simply a matter of which one's pros, in your opinion, outweigh the cons. The benefits of joining a debt consolidation program are that you will have lower interest rates, you will have lower monthly payments, you will have no more late fees or penalties, you will have one affordable simple payment plan, you will have freedom from legal hassles, you will receive budgeting and money tips, and you will get relief from creditors. On the other hand, you may end up paying more, you may accrue more debt if you don't change your spending habits, you can only use it for unsecured debt, and you are still accountable for your debt.
Debt Consolidation Tips & Advice
Now you are pretty set on taking out a debt consolidation loan. But before doing so, allow us to extend some helpful advice to you. Before you begin a debt consolidation program, keep in mind that you must: inform your creditors, don't miss your monthly payments, keep a payment record, devise a debt relief plan, attempt to earn more money by getting a part-time job, and check your credit report frequently. We never said that getting out of debt is easy, and no debt relief plan is easier than the other. However, if getting out of debt is #1 priority, then time and money is going to have to be spent. Whether you are planning on applying for a debt consolidation loan on your own, or getting help from a debt consolidation plan, contact our expert debt team for some additional advice and information.