Nowadays, more and more individuals are becoming financially overextended with some type of debt. Which can be why many of them see a possible solution to their financial troubles in debt consolidation. Debt consolidation is a process where the individual usually takes out a brand new larger loan to combine (a consolidation) several of his outstanding debts. The purpose of this new loan is to pay off all the debt that has been consolidated, therefore, leaving the individual with just a single monthly payment to worry about. What immediately attracts the attention of consumers when talking about debt consolidation is that the new payment of the debt consolidation loan is normally lower compared to what you would normally pay for the multiple debts that this loan combines. The debt consolidation loan is also generally of a lower interest rate than the average interest rate of the multiple debts. Even though debt consolidation is a great tool when used correctly, people should still be cautious when considering which debt consolidation company they are going to work with.
Debt consolidation companies
There are some debt consolidation companies that can give you lower monthly interest rates and payments, but they are only able to do so by extending your loan term for a much longer period. Therefore, you end up paying even more money than you would have paid without debt consolidation. You should keep in mind that the best debt consolidation companies out there have the practice of negotiating a lower total amount of the debt with the creditors before making any debt consolidation loan plan. What they do is simply giving you a brand new loan that covers all your existing debt, and therefore enabling you to save money that would have otherwise been spent on interest. When you are looking for a debt consolidation company, you should make a list of companies that have gotten your attention and start comparing what they are offering to you. Narrow down that list until you pick the best debt consolidation company to handle your debts.
When to use a debt consolidation company?
As we have already mentioned above, debt consolidation loan is a single, larger loan that is a combination of multiple smaller debts by making your repayment schedule more simple and your overall monthly payments lower. Therefore, a debt consolidation company may be able to assist you and help you pay off the debt you are carrying much quicker and also to help you get rid of some of the stress while repaying your debts. In case you are struggling with multiple unsecured debts such as medical bills, store cards, credit card debt, personal or student loans, finding a reliable debt consolidation company to work with is something that is definitely worth your serious consideration.
In order for this debt relief plan to work, you need to have some sort of monthly income, otherwise no debt consolidation company would want to work with you. If you have a stable source of monthly income, your debt consolidation company will be able to work out a repayment plan based on what you could realistically afford to pay for your debt consolidation loan each month and also will negotiate with your creditors on your behalf to make your debts repayment a bit more manageable.
What are the available types of debt consolidation plans?
Generally, there are two main debt consolidation methods. Both methods can basically achieve pretty much the same result but have different approaches. Achieving what you want is highly dependent on your understanding of how these two methods work. Therefore, choosing the one that could better suit your specific situation and give you the end result that you are really looking for.
Debt settlement is a debt consolidation plan that is designed to help people who are unable to repay fully repay their debt and are facing bankruptcy. With a debt settlement plan, your debt consolidation company will contact the creditors and offer them to settle your accounts in exchange for a certain portion of the debt amount that you owe them.
Debt management is a debt consolidation strategy that consolidates your multiple unsecured debts into one larger monthly payment that you need to send to a debt consolidation company. After which the debt consolidation company will distribute that payment to all the creditors whom you are owing to. Debt consolidation companies work directly with their client’s creditors to secure certain benefits which will help with the repayment of the debt over time. A debt consolidation company can secure benefits such as over-the-limit or late fee waivers, interest rate reductions, and an overall reduced monthly payment.
Once you find a reliable debt consolidation company, that company will guide you and help you choose the best debt consolidation plan that will benefit your specific financial situation.
Do all debt consolidation companies offer the same services?
The answer is no. Every person has a unique financial situation, and the same goes for debt consolidation companies. They too have their unique offerings and practices. Try to find a debt consolidation company that offers a number of different debt consolidation plans and is ready to guide you through every step of the process, and ultimately, a company that can give you the best debt consolidation plan based on your specific needs, not based on their balance sheet. When you have gathered a list of different companies, start calling every one of them and ask questions about their specific offers. Then start comparing these companies based on their services and fee structures and try to assess the accreditations and reputation of each company. Try to compare the pros and cons of each debt settlement and debt management programs so that you will be able to determine which of the two methods is more beneficial to you.