For many people, debt consolidation is a way to consolidate one’s bills into a smaller monthly payment that is more affordable. Through the acquirement of such a loan, the individual can start to get their financial life back on track and get the debt reduction you need.
Before you obtain a debt consolidation loan, the first step is to determine whether the new payments will be less than the payments that were being made before to each creditor. This is particularly important since some of these loans, specifically unsecured ones, have higher interest rates. Therefore, if the new payment is not low enough to be feasible, it is not worth it.
In order to determine whether the payment will be less than what you’re currently paying, you should take your existing debts and calculate the fees and interests on all of these accounts so as to determine the total amount that you are currently paying. Once these have been calculated, compare this figure to the new amount that will take effect after the consolidation loan is acquired. Finding the best deal is important so research different banks in order to find the best deal with the lowest interest rates. Currently Bank of America is one of the leading banks offering low-interest consolidation loans.
Individuals who are not currently able to make their payments should not automatically obtain a debt consolidation loan. It can add to the current problems if you do not have the discipline it takes to make the payments. If you find that you don’t have the drive it takes, credit counseling may be a better option. Seeking help from professionals can help to manage your debt and can also encourage you to change your spending and bill paying habits.
Instead of acquiring a credit card debt consolidation loan, some credit counselors recommend that you eliminate your use of credit cards as plans for reduced payment can often leave a negative mark on your report. Although you are paying an amount that was agreed to by the creditor and yourself, you did not actually pay off the full amount.
In order to choose a good debt consolidation firm, you should make sure that it is highly rated and thoroughly legitimate. You should ensure that the they are members of either the National Foundation of Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. You should also request that the firm provide you with references and make sure that you confirm them before taking out a loan. Ensure that the credit counseling or debt management answers your questions and that you understand how the entire process would work before embarking on a debt consolidation loan.
Megan Albricht is a writer for FranklinDebtRelief.com.
- Personal Loans For Debt Consolidation (debt-consolidation-2u.com)
- Military Debt Consolidation – Pros and Cons (2010taxes.org)