Debt consolidation is the act and process of taking out one loan to pay off many other loans and bills like credit card bills or student loans. The main aim of debt consolidation is to basically reduce the total amount of loan repayment through interest rate reduction.
Many debt consolidation companies, programs and services have argued the benefits and advantages of debt consolidation when one is in cycle of debts. But the question is:
Is debt consolidation really useful in helping people get out of their debt problems?
While I agree that debt consolidation can help debtors solve their debt problems, many debtors really have much difficulty to get out of their debt problems even after they consolidate their debts.
Why is that so??
Think about it – Most of these debt consolidators are in debt problems because they spend on credit and are used to spending more than they can afford to. As such, they eventually run into debts in the long run since they are always spending more than they earn every month.
After debt consolidation, these debt consolidators will have their credit card balance clear and a single monthly loan payment (with extended repayment period). With a lighter loan repayment amount, most of these people will begin to relax and usually over spend on their monthly budget again in the near future.
By doing so, they will eventually run into debts again. Thus, it is not surprising to see many people who have had consolidate their debts before to run into debt problems again.
How does one get out of debts?
Debt consolidation is a tool to help debtors get out of debt problems. Unfortunately, many have used it to increase their debt problems as mention above.
The only surefire way to get out of debts is really to adjust your spending habit and commit to a disciplined lifestyle. If you ask me, the get out of debt formula is really simple: It’s either to earn more money or spent less money.
There are several types of help available for unsecured debt consolidation. You can choose to take out a debt consolidation loan to lower your rates and payments. You may also choose to use a debt consolidation programs, letting a third-party deal with your creditors. And finally, you can turn to a credit counselor to help you find the best plan for your situation.
Debt Consolidation Loans
A debt consolidation loan is any type of loan you take out for the purpose of paying off other creditors. Ideally you want to find a loan with lower interest than what you are currently paying on your bills. However, even if you don’t lower your rates, you can lower your monthly payments by choosing a long-term loan. The drawback of course, is paying more in interest charges.
You can choose from a secured loan, usually backed by your home or unsecured loan. Secured loans, including a home equity loan, second mortgage, and line of credit, will have lower rates and the tax advantage of writing off your interest payments. However, if you don’t have a home, you can still find relatively low rates with a personal loan.
Debt Consolidation Programs
You can also work with a debt consolidation program to lower your rates and consolidate your bills. This third-party agency will negotiate lower rates with your creditors for a small fee. You also only make one monthly payment, letting the agency pay your bills from that sum. Some non-profit agencies also specialize in helping those with six or more months of late payments.
Before you sign up with these types of programs, be sure you have researched several agencies. Compare pay back dates, fees, and estimated monthly payments.
If you are confused about your options or just don’t have a plan for getting out of debt, consider visiting a credit counselor. As a non-biased person, they can explain your financial options. They can also discuss with you’re the pros and cons of each options, helping you find the best program for your unique situation.
Besides helping you to consolidate your bills, they can also help you develop a monthly budget and long-term financial goals.
So they could get again on the right track monetarily many individuals are searching for monetary assistance,. If you’re trying to find free financial assistance you may well be considering this informative article.
Perhaps you have observed the phrase ‘you will get what you purchase’? Effectively there’s plenty of fact compared to that assertion, but it ‘s never vital since suggestions is free that it’s bad, you will get compensated suggestions that is bad also.
Essentially, with whichever suggestions you get, whether compensated or free, think regarding the guidance that you will be given and really additionally you should use your own common sense.
You will desire to check any financial adviser’s credentials that you just compensated assistance or find advice from, whether or not it truly is not blame. Even though it is possible with an expert having experience that are superior supply terrible tips.
You want an advisor that actually looks at your personal situation and will be offering guidance consequently as suggestions that’s advantageous to one person may possibly not be good for another.
It’s recommended to talk to several financial specialist and then examine the advice that is different that you receive. You both blend a few of the points or select which assistance will undoubtedly be accommodated and will get a number of items and diverse ideas of watch your preferences.
If you’re seeking free financial guidance you can begin by taking a look at these areas. Just be sure when seeking help to keep the above details.
1. Your neighborhood lender or credit partnership is an excellent spot to search for tips that is financial.
Advice that is free may be offered by several and when not they could be able to recommend a firm that is neighborhood that is good.You can even verify phone-book your local paper and on occasion even in the regional library once and for all financial agents advisor.
Try wondering around also, family and friends and family might use a great financial manager themselves they can advise. Some planners will help on a sliding scale and may have the ability to offer you several aid for zero or tiny expense. It surely doesn’t harm to ask.
2. It is better to find a that is not express but then you can attempt online when you can’t seem to locate one domestically.
Should you consider economical tips online nevertheless you need to do so cautiously as you just have no idea who you are currently dealing with on the net. Some firms may publicize free advice but you will typically locate that after you start to get involved they could commence to ask fees regarding this and expenses.
Or combined with suggestions they might likewise try to sell their particular services or products to you. Once you look for monetary suggestions on-line be sure you be thorough about supplying personal information and question plenty of concerns. Several firms may look like good economic agents but they could possibly be only someone.
One-piece of assistance you should really take on panel will be to seek advice from your neighborhood Business Institution to view before you will get associated with the company if a company has received any complaints recorded against these. You traditional companies and can certainly do this having both on-line.
You must do not forget that not many people are honest and you’ll find individuals out there which can be soon after your cash. Always utilize common sense if you feel that anything simply does not look rather suitable next it possibly isn’t, consequently merely walk away and discover another person and when searching for free monetary suggestions.
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Locating good debt reduction advice may end up being somewhat confusing for you if you want to lower how much personal debt you have.
Too much of the available info makes it seem like it’s nearly impossible.
Then you have those places who pretend their advice will help you get out of debt, but it’s actually designed to make stay in debt longer.
There are also those who expect you to live on practically nothing.
While most of them mean well, the truth is that they may not be good options for your current situation.
That being said, the following debt reduction advice will help you get out of debt, regardless of which specific method you end up using.
1. Find out exactly where you stand financially.
Start a spreadsheet or get a sheet of paper and write down all of your debts.
Include every company and person you owe money to, including car payments, mortgage, personal loans, credit card balances, student loans and any bills that are past due.
Next to each creditor, write down the total amount you owe, the minimum monthly payment, and the interest rate you are being charged.
Once the list is done, add up the totals in all but the interest rate column.
You will now see the total amount of debt you currently owe, as well as the total minimum monthly payments you’re expected to make.
The totals will probably shock you, but it’s important debt reduction advice because it shows you a realistic picture of how much debt you have.
2.Figure out how much money you have coming in and how much you are spending.
Make a list of all of the income you have coming in on a regular basis, as well as any money you could easily get your hands on if you had to (but don’t touch any retirement savings).
This gives you a better idea of how much you will be able to apply toward your debt reduction strategies, but there’s one more step.
You need to also write down all of your expenses. Don’t leave anything out.
The more honest and accurate you are, the better.
Once you see where all the money is going, you can start to see areas where you should be able to cut expenses.
3.Put all of this data together to start reducing your debt.
Free up as much money as you can and apply as much of it as you can toward the debt with the smallest balance (while paying the minimum amount on all others).
With luck, you may even be able to pay it off right away. Each time you move on to the next debt, rollover the amount you were paying on the previous one.
Keep following this debt reduction plan and you will be out of debt faster than you can imagine.
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