How to Consolidate Your Debt

What is debt consolidation? Debt consolidation is a concept that is used in managing debt that has become unsustainable. It involves replacement of all your debt repayments with a single payment source that is a lot easier to manage. It is also called debt refinancing and you are the borrower, will take out a single loan, sometimes at a lower interest rate, in order to replace all the other loans which are becoming harder to manage.

People take up consumer loans for a number of reasons such as paying mortgage, credit card loans, buying a car or solving some short-term financial emergencies. This is what is known as consumer debt. The problem is that many people eventually pile up on this consumer debt, particularly on the credit card debt at high interest rates. Very soon, they find all these payments unmanageable and they find themselves at risk of default or going bankrupt. One of the best ways in which you can sort out your financial mess is by applying for debt consolidation. In order to get a good debt consolidation option that will be beneficial to you, there are certain steps that you need to follow. These include the following:

Lookup your credit reports as well as the credit score

Apply for your credit reports from all the three credit reporting agencies. You can do this at least once per year for free. For subsequent requests, you will have to pay a fee. It is important to review your credit reports first in order to ensure that you are eligible for debt consolidation agreement with your creditors. The credit reports must have a list of your debts.

Take your debt inventory

Make a list of all the debts which you owe your creditors on all the loans and cards that you want to consolidate. Look at the interest rates of these debts as well as each of the monthly payments. Here, you will need to prioritize on those debts which are most important to you. You will need to begin consolidating those balances which have very high interest rates as these are the ones most likely to sink you financially. read more

What are the Alternatives to Debt Consolidation?

If you are ineligible for a debt consolidation loan or you have had your applications rejected by the lenders, there are various alternatives to debt consolidation that you can explore for financial relief.

What is debt consolidation?

Debt consolidation, by far, provides the most effective and popular option that you can use in attacking and managing debt that is unsustainable. It is an important financial instrument that is used by many people to help them understand their debt problems, focus on it and eventually eliminate the debt through a manageable and simpler payments plan. They are quite beneficial but they are not the only options which are available for you. There are many alternatives to debt consolidation which you could deploy. Here is a look at some of the good alternatives to consolidation loans which you can use in order to eliminate all your debts.

Debt agreements

Also called Part 9, debt agreements provide the best alternatives to debt consolidation loans that you can use in managing your debts. They are formal agreements which the debtor will make with their creditors where they will arrive at a compromise on how the debtor is going to repay the loan. The debtor will generally be looking for better terms that will make the debt less costly and manageable.

The debt agreements provide effective solutions to people who are having a lot of difficulty in meeting their financial goals and are probably locked out of consolidation loans too. There are many benefits that you will get when you opt for the debt agreements. These include the following:

·         You will be able to stop the court-imposed remedial action with regards to your debt.

·         Securing a formal debt agreement with your debtors enables you to stop harassments by the debt collection agencies.

·         The agreement allows you to put a freeze on your interest charges and in the process save thousands of dollars in interest repayments.

·         It allows you to combine all the unsecured debt expenses into a single manageable debt repayment amount. read more

Expert Advice on Debt Consolidation Loans

Consolidating your debts into a single loan might seem like a simple thing that can make your life easier, but it is not a great idea. Because if you fail to make payments on your debt consolidation loan, you could lose many properties.

  • Free debt advice

If you are seriously looking for a consolidation loan, then it means you have difficulties paying your debt. Perhaps you think that your options are limited, but there are many options, more than you can imagine. There are some debt solutions organizations that can advise you on how to clear your loan faster.

  • Debt consolidation loan: definition

If you have more than one debt, and you are having difficulties in making repayments, you can incorporate all these loans into a large single loan as a way of reducing your payments. These loans are not unsecured debt. in fact they are secured against properties such as a home. However, there are those who allow unsecured debt repayment, but for little amount.

A consolidation loan allows you to borrow sufficient money to pay off all your debts and then owe the cash to a single lender. Note that debt consolidation loans can be a little bit tricky and may lead to more debts.

Debt consolidation makes sense when your primary aim is to use the money to pay debts and keep up with the current payments.

  • When does a debt consolidation loan make sense?

It only makes sense if it helps you pay less interest rate that what you were previously paying.

It only makes sense if the total repayment amount would not increase, and you can still pay the new price.

Nevertheless, you still need to consider risks that come with giving up you house as collateral; things may not change in your favor in the future.

  • When does a debt consolidation loan not make sense?

It does not make sense if the interest rate is higher than what you were initially paying. If you cannot afford to pay the new amount and the loan does not clear your debt, then debt consolidation loan does not make sense.

If the monthly repayment is lower, but the credit takes even longer time to clear (meaning the total repayment amount will be very high) then the loan does not make sense. read more