DEPT: Is Debt Consolidation Good?

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Debt consolidation businesses are booming as many people struggle under the weight of big debt. Choosing to consolidate your debt can seem like an easy solution if you can save monthly expenses. But is debt consolidation a good thing? For some, yes. For many, it may not be the answer you need to save money on your bills.

Learn how debt consolidation works so you can decide if it's good for you.

Considerations

1. Debt consolidators often do not work for free. Many ask for long-term payoffs that, at first, seem reasonably lower but cost you more in the end. For example, let's say your debt is $10,000 at an average of 20 percent APR that would take 5 years to pay off at $200 per month. If the consolidation loan gets your payments down to $100 a month, you would still be paying for the same debt for 10 years, plus whatever fees the consolidation company charges. If you never reach a point where you can put some of that saved money towards the debt, you stay in debt longer. Your creditors do not always list your accounts as paid in full by the consumer. They can be listed as debt management, charge-offs, closed by creditor...you name it. Even if you've never missed a payment, having these labels attached to your credit report may turn off future lenders.

Prevention/Solution

2. One solution is to transfer balances of credit cards into a lower-interest card. You may still end up paying the same amount each month on your credit card bills, but you still have the benefit of making one payment. You will also pay off the total debt faster since the interest rate is lower. Another way to avoid debt consolidation for credit cards is to refinance other loans you have, such as automobile loans. If you can shave off 3 percent of your loan's percentage rate, take the savings and pay on your credit card. You may end up extending the loan of your vehicle, but at least you have something to show for it on a 7 percent APR vehicle versus a 19 percent credit card.
3. It can take less than three days for debt consolidators to negotiate new terms with each creditor, should the creditors accept the program. Consumers would most likely have to authorize the consolidation service to draft the payments straight from their checking accounts. Once the terms are agreed upon, consolidation loans can take anywhere from a few months to several years for a payoff.
4. One major benefit if debt consolidation is that you can pay off several high-interest credit cards at a significantly lower interest rate. Lower interest rates means less time it should take to pay off the accounts. Also, debt consolidation allows you to pay just one bill instead of several creditors that require payments at various times of the month. With debt consolidation, you pay once a month to one service. For home equity consolidation loans, there is a possibility of a tax deduction because of what you pay in mortgage interest rates.

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DEPT: How to Select a Debt Consolidator

DEPT........ DEPT.......... DEPT.............. how to solve it????????

When you have too much debt and are looking for a way to reduce it, you may be considering debt consolidation to get your debt under control. There are plenty of debt consolidation companies out there that are happy to take your money, but how do you choose a debt consolidator that is legitimate and looking out for your best interests? Choose a debt consolidator who is willing to work as your partner to help you get out of debt once and for all.

STEP BY STEP HOW TO SELECT:

1. Step 1

   Research different debt consolidation companies. Retrieve their contact information so that you can call them. You can research companies by going to the website in the Resources section, and choosing your state to see the different companies that are available to you.

2. Step 2

   Gather your debt information. You should have credit card statements, past due bills and any other correspondence from creditors. Add all of your debts together for a total amount that you are in debt.

3. Step 3

   Call the first debt consolidator and speak with a representative. Give her your numbers as far as how many creditors you have and how much total debt you have. Ask for an estimate of how much your consolidated payments would be, how much interest the debt consolidator charges and the terms of that particular company's consolidation.

4. Step 4

   Write down the information that the customer representative gives you as far as the terms of the agreement and the estimate. Then move onto the next debt consolidator on your list.

5. Step 5

   Choose a debt consolidator once you've spoken to at least five companies. Choose the consolidator that not only gives the best estimate, but that you feel most comfortable working with in regards to terms and policies. Enter into an agreement with that consolidator to use them as your debt consolidator.

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How to Hire a Debt Consolidation Company to Help You?

1. Step 1
   Don’t go with the first debt consolidation company you find. As when shopping for anything else, do you research before choosing a debt consolidation company. You have probably seen several companies advertising on television and online. Take down the names and contact information for all of the companies that catch your eye. As a general rule, you should probably contact at least three different debt consolidation companies before making your decision on whom to hire.

2. Step 2

   Talk to the Better Business Bureau (BBB). A good place to begin researching debt consolidation companies is the BBB’s website, located at BBB.org. Make sure that the company you work with does not have any serious, unresolved complaints.

3. Step 3

   Talk to others who have used debt consolidation companies. If you have friends or family members who have consolidated debt, talk to them about the companies they’ve worked with. You may also want to look on Internet message boards to hear about others’ experiences with specific debt consolidation companies.

4. Step 4

   Get everything in writing. Before you agree to work with a debt consolidation company, get a written copy of their policies and fees. Take the time to review it carefully and clarify any questions you have in advance before signing anything.

5. Step 5

   Make sure everything is clear. The debt consolidation process can be complex, so be sure that you understand all of the terms from the start. If your debt consolidation company is not helpful and up front in answering your questions, consider working with someone else. Remember that your financial health is at stake!

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Would a debt consolidation loan be suitable for helping you?

Debt consolidation can help people with several debts who want to make their finances easier to manage, or who want to reduce the amount they need to spend on their debts every month.

It is important to note, however, that debt consolidation loans would not be suitable for everyone. For example, they wouldn't be appropriate for someone who has an unstable income, whose debts are really out of control, or who doesn't think they would be able to repay the consolidation loan within a realistic amount of time.

If you have multiple debts and want help simplifying your finances, you should seek professional debt advice (click here for more detail info to help you). The right debt adviser will be able to tell you if a debt consolidation loan is suitable for you.

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Debt Consolidation Information and Advice Solver

Debt consolidation involves taking out a new loan and using it to pay off all your existing unsecured debts at once, which will leave you with just one debt to repay.

Rather than making multiple monthly payments to multiple creditors, you would make one payment to one creditor until the loan (plus any interest) has been paid off.

There are other benefits a debt consolidation loan could deliver. For example, you may be able to lower your monthly outgoings by repaying the loan more slowly - arranging to spread your repayments out over a longer timeframe.

However, this could lead to you paying more interest in the long run - although this won't necessarily be the case. If you are consolidating debts with a high APR (Annual Percentage Rate), store or credit cards for example, then you may actually save money in interest in the long run by consolidating your debts. This is because the interest rate on your loan may be significantly lower than the interest rates on your 'old' unsecured debts - therefore, the overall amount you repay may be lower. Your debt would be growing for longer, but would be growing more slowly.

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