Debt Consolidation Blog

Many people think they can not get debt consolidation with bad credit.  That is not true though. Debt consolidation is not just about having a company do the work for you.  If you own a home, you can possibly get a home equity loan to pay off you debt.  This is a good way to go if you have enough equity to pay off your unsecured debt.  You could end up with a lower payment, lower interest, and even be able to write off the taxes paid on the loan at the end of the year.  For this you would need to check with your accountant.  Having a lower payment and interest can help you pay off the debt sooner than you would have keeping your current debt where it was.  Keep in mind though that a home equity loan will have a time limit to pay the money back.

There are also lots of offers out there to get a debt consolidation loan.  And they aren’t necessarily called a debt consolidation loan, but have the same properties.  A fixed payment, fixed interest rate, monthly due date, set amount of time to pay off.  These can also help get all your unsecured bills into one payment, making it easier to pay higher amounts to pay it off faster.  Be wary though, if you have bad credit the interest rate may not be lower than what you currently pay.  So even though your monthly payment may be lower, the interest could make the total payback more than if you had kept your separate debt.  Of course, if you get a loan of this type, you should get rid of you credit cards so there is no temptation to use them again, and get into even more debt than you are trying to get out of currently.

Finally, there are debt consolidation and debt elimination services.  These have been around for several years but recently have taken to a higher knowledge in people.  Debt consolidation companies’ help you pay back a part of your unsecured debt with the company you owe the debt to.  Companies say they can get 40-60% of your total debt lowered so that you can pay it back.  However, you must save up the money first and then contact the debt company to make the payment.  Each has its own way to get you to save the money.  It is supposed to take 3-5 years depending on how much debt you have and how much less the company owed will take.  And you must owe at least $1000 to any company you wish them to consolidate the debt for.  Many are also scam companies, saying you pay them the money and they will pay your debtors.  Do your homework on a company before choosing one.  Debt consolidation companies do charge a fee.  It can be 3-5% of your total debt.  So you will still have to pay them, usually upfront, before getting their help to receive debt consolidation with bad credit.

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First of all, what is debt consolidation? Is there a need for you to consolidate your debts with a debt consolidation company? According to statistics, an average American home has about 13 credit cards with an average total debt of $5,800. Trying to keep all these cards updated and maintaining them can be difficult. There might be times that some cards will be missed out because of the numerous bills that come every month.

To better manage your credit card and other bills, you might need to avail of the services of a debt consolidation company. Debt consolidation means combining all your smaller debts into one big one and just making a single payment for all of them. If you have several debts to pay monthly, debt consolidation is a good option for you.

Some advantages of going with a debt consolidation program is the possibility for you to stretch your payments so you’ll be paying a much lesser amount every month for a longer period of time. Also, if your debts are mostly credit cards with high revolving rates, consolidating your debts by getting a secured loan can be an advantage because of the lower interest rates.

A common pitfall of when you consolidate debt is that some debt consolidation programs make you think that you’re paying less but actually just stretched your payments and the total interest is much higher especially when your credit record is not that good. You can even end up paying about 20% interest rate.
Try to remember that debt consolidation just shifts your debts and not eliminate them.

Once you’ve decided that debt consolidation is the only solution for you to be eventually debt-free, the next step is to find the right company. But how do you go about choosing the right debt consolidation company? What are the things that need to be considered?

Here are some tips to look for the best debt consolidation company that will work for you.

- Avoid companies who charge you large fees upfront and promises to return the money once consolidation is already complete. All the fees that will be charged should be discussed with you carefully.

- Avoid those companies who are trying to rush you into getting their service. There are some companies who start explaining things to you and after 10 minutes, they are already pushing and pressuring you into signing up with them. Choosing the right company should be taken slowly and careful research should be done before finally settling with one.

- Make sure the company will provide you all the agreements in writing. Do not rely on verbal promises as you might end up losing a lot.

- Once you find an agency that you think has good rates and will work for you, make sure to check it with your Attorney General or the Better Business Bureau. They will be able to tell you if there are customer complaints about the company.

- Find out if the company is accredited and if their counselors are accredited by companies such as the Association of Independent Consumer Credit Counseling Agencies and the National Foundation for Credit Counseling.

Deciding if you’re going into debt consolidation is not an overnight thing. Thorough research and careful assessment of your current financial situation should be done to make sure that you will have a smooth process in acquiring just a single loan for all your debts.

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To promise the heaven is the work of ads and to use your discretion is your job. You would often notice ads of companies claiming to successfully carry out non profit debt consolidation. It is indeed wonderful if you are able to put together all your outstanding payments into one lot at an attractive interest rate and perhaps term too. And all this while no profit to themselves. It seems too good to be true. There is definitely reason good enough to check it out before trying this out. As always, get your basics clear before venturing out to applying yourself to believing on tall promises.

The concept of non profit debt consolidation companies is not dubious though you need to fully check out the credentials before getting into it. Non profit debt consolidation companies operate on the principle on collection of revenue in the form of donations. Non profit debt consolidation companies counsel you on how you can consolidate all your outstanding spread out over various heads as loans, credit card out standings, mortgages etc and bring them as one consolidated debt. These companies also try to negotiate your debts and bring them down by the negotiating tactics. In today’s context, most Americans if not all have a variety of debts and the total is a formidable figure often. The settlement by careful negotiation does yield positive results. The basic point is that the lender realizes that an effort is underway to seriously settle the debt. Secondly, he understands that he is in the hands of professionals.

Thirdly the lender can undoubtedly understand the arithmetic of numbers in the sense that earlier he gets his debt settled the more he makes by not losing interest. The debt realized is any day having to write off a debt as a bad debt. Next, the point to be considered on the side of the borrower is that he gains in his debt getting reduced. There is also basic advantage of everybody saving on time, money, litigation and bitter taste in the mouth.
There is then a special line of thought that questions you, as to why you cannot do it yourself. The answer is not difficult to find. You can do it yourself if you are prepared to apply yourself and do some hard work. After all, you can find out the interest rates in your state, as they will be much different from national average. The difference could be more than 4% to 7%. There are some tips too, which can come in handy if you intend to do yourself what these non profit debt consolidation companies are doing. Some of them in non profit debt consolidation are:
o For your credit card debts, sit with your credit card company and negotiate an amount you can pay out if your outstanding is considered erased.
o Do your handiwork as a good negotiator and have your company put you in good credit listing. This helps you eventually for any future loan requirements at attractive interest rates.
Of course, here the extreme option of doing away with your debt by simply not paying it is not suggested. There are better options as suggested still available.

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Secured debt consolidation is the consolidation of a debt by keeping as security some asset of yours, which serves as a collateral until the time you pay off the debt. In Secured debt consolidation what you should remember is that whatever the debt is pertaining to, you can consolidate it as long as you are able to provide a security to the lender.

There are some facts about secured debt consolidation which you need to keep in mind:

· Using secured debt consolidation is possible only if you have something to pledge. This means that you should have something physically available that you can pledge like your home, a car, secured bonds etc.

· Secured debt consolidation ensures that you get a good enough deal in terms of interest rates. This is true because you are keeping something of value as a security in the hands of the lender as a reassurance to him as safety of his money.

· Secured debt consolidation is valid for multiple debts too so that you can combine a variety of debts like credit card debts, to meet medical expense bills etc

· Secured debt consolidation helps you to greatly restrict your monthly expenses than when you were having a number of loans at different rates of interest and other borrowing terms.

· Secured debt consolidation allows you to choose a monthly installment that suits your pocket. If you still find that, for the amounts you are faced with, your monthly expenses is coming considerably high then secured debt consolidation provides you with the solution of stretching your loan term. This loan term will be stretched till you reach a monthly installment that you are comfortable with.

You would find generally that for loan amounts more than certain fixed limits say 5000 pounds you would have to go in for a secured debt consolidation. Secured debt consolidation is a convenient way of reducing your debts progressively at your chosen pace and your chosen monthly expenses that hurt your pocket the least. Best interest rates vary from state to state and are much different from the national average. Typically you can find rates in the region of 6.1% to 7.9% APR.

However, you need to evaluate pros and cons of secured debt consolidation as applicable to you in particular. The advantages of putting all your outstanding debt into one consolidated loan and at a lower interest is very tempting. What you got to be sure of before getting into secured debt consolidation is to make a self-analysis of your determination and capability to pay the debts for sure without default. If you have the slightest doubt in your mind then secured debt consolidation is not for you. The goodies of secured debt consolidation are not being showered on you by your lender for nothing. He has your asset with him as collateral, which he can claim if you default on repayment. It is therefore also wise to shun away from secured debt consolidation companies who promise you unrealistic things like reducing your debt by leaps and bounds. It is important to understand that in secured debt consolidation you are only consolidating your existing debts under one umbrella of a consolidated debt which is at a lower interest rate or increased term so that you are able to afford the monthly expense.

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