Are you familiar with debt consolidation? This is a program that can help you to combine your debt into one monthly payment, often making it easier for you to manage your bills. While the program sounds great in principle, there are some things to watch out for. Continue reading to learn more about the ins and outs of debt consolidation.
Never scoff at negotiating your debt. While you may wish for all the debt to go away, it will not. Bankruptcy is your only option for a clean wipe, and most people do not want to go that route. If you can reduce your debt by any amount of money through negotiation, do so. Dropping some of the debt is better than nothing.
Do you own a life insurance policy? You might want to consider cashing in the policy so that you could pay your debts. Talk to your insurance agent and see what the cash value of your policy could be. Sometimes, you can borrow part of what’s invested in the policy to help pay off debt.
Refinancing your home could be a good debt consolidation strategy. Find a financial institution willing to refinance your home and take some cash out at closing. Use the cash to pay your debt off and make your mortgage payments on time. Compare the interest rate of your mortgage to what creditors are charging you.
Debt consolidation doesn’t just mean having companies speak to other companies on your behalf. If you are still able to, a traditional bank loan is probably the smartest way to get out of debt. A loan from a bank or a credit union doesn’t yield the same drawbacks as other debt consolidation methods do.
When evaluating whether to use a certain debt consolidation agency, see if they are licensed by an outside organization, preferably the NFCC. Test them as well by seeing if they know how your debt consolidation situation is going to be affected by your state’s laws. Each state is different, and you need a licensed and certified debt specialist that knows about the different laws by states.
Avoid debt consolidation agencies that pay their employees on a commission. A counselor who is motivated by a commission will be tempted to offer you more financial products than you really need. Find an agency that does not motivate counselors with commissions so you can get an unbiased opinion and useful advice.
When consolidating your debt, it is extremely important to find a reputable, respected debt consolidation company. Before hiring a debt consolidation company, consider how long the company has been in business, the company’s perceived reputation and the amount of money that the company charges in fees. Shop around to find a debt consolidation company that meets your needs.
Ahead of seeking debt consolidation, talk to your creditors about lowering your rates. Talk to the credit card company to determine if they will reduce your current interest rate as long as you destroy the card, allowing you a fixed interest rate. You won’t know what they are willing to offer unless you contact them.
You need to consider if debt consolidation is truly the answer to all of your problems. If you don’t change your spending habits, it won’t actually better your future. You have to commit to the process entirely, from saving money for emergencies to not spending on things you don’t really need.
If you’re looking at debt consolidation companies in Florida or Maryland, you should know that they do not need to be licensed. If you live there, think about using a debt consolidation company from another state. You will have very little legal protection when working with a professional who does not have to be licensed.
If you decide to consolidate your debts, be smart about the savings. Since you will be paying less each month on those bills, save as much of the excess as you can and put it in an emergency fund. That way, you will be less likely to get into debt in the future because you will have a small reserve from which to draw from when unexpected things happen.
If you are stuck in a never ending cycle of debt brought about from payday loans, debt consolidation may be a good solution for you. Many payday loan companies offer advice and will help you consolidate your payday loans into a single affordable payment. Because of higher interest rates, many people get caught in this payday loan cycle and cannot get out without help.
If you borrow money from family as a debt consolidation loan, be sure to put the contract into writing. This protects both sides and will be convincing to the person you ask for the money, letting them know that you are serious. Be sure to figure out the interest and monthly payments you can afford before you ask.
Know what you want your finances to look like in the future prior to consolidating your debt. If you have the ability to pay your debts off slowly, you may not need debt consolidation. If you have to escape debt to finance an important project, consolidating debt might be the best option.
Once you get a debt consolidation loan, you must commit to never becoming overwhelmed with debt again. If this means living a lean lifestyle where you count the squares of toilet paper you use and you don’t splash out on expensive clothing, so be it. It is better to live stress-free than fabulously.
If you’re looking to consolidate your bills, you have to start with an understanding of the basics first. This article has provided you with some sound advice that can familiarize you with the ins and outs of debt consolidation, helping you to make smart financial decisions. Read it again, and make sure to use these principles when making your debt consolidation decisions.