Debt Consolidation: Do It Yourself
However, if your situation is not so complicated, you can carry out your own debt consolidation process without too many hassles.
If you don’t have too many creditors and different types of loans and credit cards, solving your debt problems doesn’t have to be so complicated. You can save the money a debt consolidation company will charge you and solve your financial difficulties by yourself.
Debt Negotiation
The main part of a debt consolidation program is debt negotiation. What you need to do is to contact the lenders and try to speak with someone who has the ability to decide over your debt. This can usually be done with personnel from administrative or legal departments. Customer Service won’t help you on this matter; just ask them to put you through to the proper department.
Once you’ve contacted the lender, you need to make things clear. You have to state that you are unable to repay your debt under the current terms and that you need to have your debt rescheduled under more advantageous terms in order for them to get their money back. Don’t mean it as a menace, you need to sound concerned, they need to understand that you want to pay but you can’t and that if they are flexible enough they’ll be able to recover their money without entering long and costly legal processes.
Unless the lender holds a real estate guarantee, chances are that they will tailor a new loan with favorable terms so you can retake your monthly payments without sacrifices. If you are convincing enough you can get all the debt created due to punitive fees and interests eliminated and a new loan reschedule to suit your needs.
Get a Loan for Consolidating
Another thing you can do, either instead or after debt negotiation is to obtain a loan for a considerable amount repayable over a long period of time so you can use the money to cancel outstanding debt and end up with a single monthly payment with a lower interest rate. By doing so you’ll get the same results as a debt consolidation company handling your payments. You’ll have a single monthly installment to worry about and you’ll also save thousands of dollars on interests over the whole life of the loan.
Doing this after debt negotiation is better, since you’ll already have reduced your debt substantially after debt negotiation. If you add to that reduction the money you save by exchanging your current debt with a single debt consolidation loan, you’ll really improve your financial situation and you’ll be able to recover from bad credit within a couple of months.
In order to get approved for such a loan you’ll need to hold some equity on your home. This kind of loan can only be obtained by applying for a secured loan. A home loan, a cash out refinance loan and a home equity loan are the options suggested by most debt advisors.
By: Mary Wise
July 14, 2010
Is Debt Consolidation an Answer to Credit Problems?
Debt consolidation is a term doing the rounds frequently in the last few years. Debt negotiation and Debt settlement are two other terms by which it is known. It essentially means taking a new loan to pay off other pending ones. People resort to this option with hopes of securing low interest loans or even fixed interest ones. The basis of the concept is to go for smaller loans with lighter load of interest to pay off a huge interest bearing debt.
The consolidation plan urges you to go for smaller debts which can be arranged via banks or other debt consolidation companies working around the globe.
It is possible to get unsecured loans but most often there will be collateral involved like a house. One major advantage of collateralization is that the interest rates tend to go down since the lender risk is brought down. There are options whereby the consolidator will agree to buy the loan at a discount in case the debtor is on the brink of bankruptcy.
The particular company you choose to carry out the consolidation process is extremely important. Make sure you approach an established and professional company who will have numerous contacts among banks and other lending institutions. Such companies having handled numerous accounts will definitely have more influence over creditors. Beware of fraudulent companies who might land you in more financial trouble.
But debt consolidation does not come free. The companies usually charge high fees for their services. There is a rather disturbing concept known as’ predatory lending’ which means that the consolidator who charges exorbitant fees waits for the debtor to land himself in more trouble.
It could be the probability of losing his home which was collateral against a secured loan, thus leaving the debtor with no choice but to agree to the high fees charged by the consolidator. It may also be that the debtor was ignorant of other consolidators operating at lower fees in the market.
Also there have been many accusations against consolidators forcing debtors to consolidate unsecured debt to secured debt. Here the period of loan is longer and due to the monthly payments being small the debtors might not notice the fact that the actual amount repaid could be quite high. Before you go for this option it is always better to consider all other options and seek help from a professional agent.
Be meticulous with regard to maintaining proper records of debt consolidation. There have been instances where debtors who have consolidated their outstanding balances have received complaints from their creditors regarding late payments. This means that your consolidator has been up to something and needs to be checked out. Maintain regular checkups with them to know the correct status of accounts.
There are numerous players in the market today and internet marketing helps to choose those which seem suitable for your requirements. Another vital factor to be kept in mind is that consolidation limits the freedom of the debtor to discharge his debts in case of a bankruptcy move.
By: Reshma Rangaswamy
July 11, 2010
The Easiest Way to Eliminate Credit Card Debt
Credit card debt is a scary reality for millions of Americans and getting out from under it can be a daunting task, but there is help and you can find a way out. There are many options when it comes to working to eliminate credit card debt. You can use such tactics as debt negotiation, pay down plans, debt consolidation and credit counseling to get back on track. For the best results, a combination of these tactics will be used together.
Debt negotiation involves contacting your credit card companies and offering them a settlement price for a lump sum payment on the account. If you are talking with the right person, someone who has the authority to make offers on your account, then you can come to an agreement. If you have the lump sums available, pay them immediately. If you are negotiating toward a debt consolidation loan, let them know a potential payment date.
Pay down plans are a method of eliminating credit card debt where you avoid using outside help and loans and instead work a smart plan to pay off the debts. This starts with a listing of all your credit card accounts with the highest interest rate account at the top and down from there. You want to pay the largest amount you can to the account with the highest interest rate, while still paying the minimums on all other accounts to avoid default. When the first account is paid off, you simply move the large payment to the next account and continue on until everything is paid off.
If you need more help than that and don’t have the lump sum amounts available to pay off your credit card debt, then you will likely need to turn to debt consolidation. Debt consolidation loans are offered to people who are trying to avoid bankruptcy, but still get rid of debt. You apply for and work out a loan that is used to pay off all the debts you are including and then you are left with only one loan and one monthly payment to worry about. This can also bring instant relief from harassing phone calls and letters as well as financially on your monthly budget with a lower payment than those you were paying combined.
You want to follow any debt management plan up with credit counseling to help build the tools you need to avoid getting into the same situation in the future. There are many companies offering this service and can bring you peace of mind about your future finances and the dreams you have surrounding them. You can find a way to eliminate credit card debt and do it in way that saves your credit.
By: Becki Andrus
April 28, 2010
Debt Settlement Vs Debt Consolidation
With the economy the way that it is today, many people are finding themselves in a credit situation. Sometimes these “credit situations” can get a little out of control and when this happens there are some choices that have to be made. Most of the time, by this point, the situation is beyond just a plan of better budgeting.
Some people will choose to seek the help of a credit counselor while others will examine the thoughts of debt consolidation versus debt settlement and even others will go on to face bankruptcy, which should always be the absolute last resort.
It is important that you fully understand the difference between debt settlement and consolidating your debts. Both of these are ways to free you completely from debt but in different ways. Debt settlement is a negotiation process where the main objective is to resolve and clear up all of the debt by getting creditors to agree to accept only a portion of what is owed.
You do need to have some cash to work with if you decide on this option but in many cases consumers are able to settle for less than half of the amount owed. This is done by making a settlement offer with the creditor that would be paid immediately to settle the debt.
A debt consolidation would entail bundling all of your current loans into one payment with a more attractive interest rate. So, instead of paying out monthly on multiple credit cards you would make only one payment and the amount would be lower. The benefits for debt settlement are that you are immediately relinquished from your debt but the bad news is that this will stay on your credit and will appear as exactly what it is, a debt settlement.
Your credit score will be lower, likely under 500 and if you need any type of loan you will have no alternative but to deal with a sub prime lender. The benefits of debt consolidation are that a consolidation company handles everything so you don’t have to. They will negotiate for you and you will pay them on a monthly basis. The down side of debt consolidation is that your payments can not be late and it is not likely that anyone will extend any credit to you during this process.
Every unique situation may call for a different approach. It is the best idea for you to examine your individual circumstances and see which is best for you.
By: Chimezirim Chinecherem Odimba
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