There is a lot of talk about debt consolidation these days. All of the talk makes people think that there might not be other options, or they may rush into getting a debt consolidation loan through a company and ends up costing them more than it should. Here is a look at debt consolidation and the options that lead to real debt relief.
The Purpose of Debt Consolidation
Before you get that bill consolidation loan, it is important that you understand the goal. Once you have obtained it, you want to end up with a lower interest rate and you also want to have a longer time period to pay it in.
Start out by knowing what is the average interest on the debt you already have, and get a good idea of how long it will take to pay it all off. The length of time should be on the new credit card bills, which now reveal how long it will take to pay if off if you only pay the minimum payment each month.
If you should wait to consolidate debt after your credit score is being affected negatively, then it will be harder to get a better interest rate. The longer you wait, and the more that you get behind in your bills, the worse deal you will receive from a consolidation loan. Ideally, getting the best rate only comes if you get the loan before the financial strain begins.
Possible Problems with Debt Consolidators
A debt consolidator often promises to help their potential clients by enabling them to reduce their overall debt through debt settlement, and to give them one easy low payment each month. Many people are discovering, often too late, that the company may be taking their money for bills, but not actually distributing it where it should be going. Some have also learned too late that the company never talked to their creditors, and may even be paying late. This can only serve to damage your credit score even further.
While there are a number of good debt consolidation companies out there, they will need to be checked out carefully being using them. Many of them are fraudulent companies that are simply out to get your money.
Debt Settlement May Be a Better Choice
Obtaining debt settlement is probably the better choice, and this is something that you can do yourself. Creditors know that once their debtors get into financial trouble that it is probably in their best interest to at least try and get some of their money, since some is better than nothing. They will often be willing to downsize your overall debt, or at least give you lower payment options.
You do not need to go through any company to obtain these benefits. You can simply call your creditors and talk to them about your situation. Most of them will be glad to work something out with you. In fact, you are apt to be surprised with the results you get, which should take some of the strain of the debt off your shoulders.
Consider Your Debt Consolidations Carefully
You can obtain the debt solution you need yourself. If you should decide to take out a debt consolidation loan, be sure to shop around and go to two or three lenders before you accept a loan. Remember that you are looking for the lowest interest rate possible and a little longer term than what your bills will currently allow. Then, once it is obtained, pay down each month all you can in order to get the best benefit of your new debt consolidation.