Why Debt Consolidation Isn’t a Magic Solution

debt consolidation

Debt consolidation isn’t a magic solution for your debt; it’s the first step on a long journey.

Debt consolidation has helped thousands of people get out of debt, and on paper, it’s easy to see why. Consider a debt consolidation loan, for example. You take out a loan that’s large enough to cover all of your debts. You pay them off in one fell swoop, consolidating them into this new loan. Ideally, this loan has a lower interest rate and monthly payment, meaning you save money both now and later. You then focus on paying off that loan to be free of debt. It seems like a simple, attractive solution to a complex problem.

Just because the basics of debt consolidation are easy to understand, though, that doesn’t mean debt consolidation is easy to make work. It isn’t a magic solution, and here are three reasons why.

1. Debt consolidation doesn’t give you a safety net

One of the major reasons why people fall into debt is because they didn’t really have a choice. By definition, debt spending is spending money that you don’t have. Sometimes, we need to spend beyond our limited means just to get by.

Take, for example, student loans. Most of us don’t have $37,172 (the average student loan debt load upon graduation) laying around to spend on education. Despite that, we know that getting a college education is essential to having access to more fulfilling, higher paying jobs. So, we borrow the money to pay for the necessity, sure that the extra pay we’ll merit will make it all worth it in the long run.

Often, it’s more immediate and dramatic needs that drive people into credit card debt. Imagine that your spouse becomes seriously ill and insurance can’t or won’t cover all of the medical bills. Imagine you wreck your car and can’t afford to get it fixed, leaving you unable to get to work. Imagine it’s the end of the month and you just don’t have enough money in your bank account to make rent and keep the lights on. These everyday emergencies often force us to take on high-interest debt that can snowball fast.

Consolidating your debt can help you make these types of debt more manageable, but it doesn’t prevent emergencies from popping up in the future. In other words, it’s not a magic solution preventing you from falling back into debt. If you’re serious about becoming and remaining debt-free, understand that reality.

2. Debt consolidation moves debt around, it doesn’t eliminate it

This is an obvious reason, but so obvious that it can be easy to miss. When you consolidate your debt, you’re just moving it around; you aren’t out of the woods.

It seems almost silly to mention since the very definition of debt consolidation is that you’re moving all of your debt into one place. You’re reorganizing to make your finances easier to handle.

However, we see firsthand at National Debt Relief that people engage in plenty of magical thinking when it comes to their hopes for debt consolidation. While they know intellectually that they’re just moving their debt around, they still tend to think of debt consolidation as a final solution.

Here are the facts, though: debt consolidation, in and of itself, is not a solution to debt. It’s not even a strategy for getting out of debt. It’s a tool and a tactic that you can use to give yourself some breathing room so you can figure out the best way to get your life back on track. It’s step one in a journey, not the destination.

Why are we so adamant about this point? The sad fact is this: many people who engage in debt consolidation never actually get out of debt. They seek out debt consolidation when they’re in over their heads and use it to take some of the pressure off. When the consolidation happens, they all of a sudden have a little extra spending money and a ton of freed-up credit. They don’t have a plan to pay off their consolidation or adequate financial discipline to hold back. After all, in the moment, everything feels like it’s under control.

What do they do? They spend. They take all of that freed up credit and use it up again. It starts small with a little here, a spontaneous purchase there, a treat for newfound financial freedom, but it piles up. Within a few years, they’re in debt up to their eyeballs again, and worse than before since they now have a debt consolidation loan to deal with. Not only will they need to go through the consolidation process again, it will be even harder to consolidate this time since they have an increased debt load and a history of bad financial behavior.

It’s an ugly situation, but it happens all the time. To avoid it, remember: debt consolidation doesn’t make your debt go away magically.

3. Debt consolidation does not change your spending habits

As we’ve already discussed, people fall into debt for a wide variety of reasons. It’s hard to give one-size-fits-all advice for getting out of debt.

We can say confidently, though, that there’s a constant in just about every single debt situation. You might not be able to control all of the circumstances in your life that lead you to want to spend using debt, but you can control how you respond to them. If you’re responding poorly or irresponsibly, debt consolidation won’t change much for you. It changes the organization of your debt, but not your spending habits.

In an emergency, you typically can’t do much. However, you can be more prepared in case something happens in the future.

If you drove yourself down into debt, though, you need to be prepared to change.

The main takeaway is this: debt consolidation may make it easier to deal with debt in the present; however, it doesn’t protect you from falling back into debt in the future.

How do you make debt consolidation work for you?

If debt consolidation isn’t a “magic” solution for getting out of debt (and staying debt-free), it’s still an enormously effective tool if you know how to approach it correctly. So, how do you make debt consolidation work for you?

Make a long-term plan for paying off your debt entirely

As we’ve already said, consolidating your debt is step one on a long journey toward becoming debt-free. If you stop there, you won’t get anywhere.

Instead, take an hour to sit down and come up with a realistic plan for getting out of debt. The first step in your plan should be dealing with the present. Do that by making a budget.

Start by opening up a new spreadsheet on your computer and listing out all of your income for the month. If paid a salary, then you probably know this number offhand. If you’re an hourly employee, it will be variable depending on how many hours you get, but you should be able to come up with an estimate.

Next, subtract your expenses. There will be fixed expenses (rent, car payments, etc.) as well as variable expenses (utility bills, groceries, etc.). Try to peg them to specific numbers and dates as best you can.

Whatever you have left is the amount you’ll have to make a move on your debt load. You can go two ways here.

On one hand, you can plan to pay the minimum monthly payments on your debt. If you received a decent interest rate with your debt consolidation loan then this might be the way to go. You’ll hit your payoff date and be able to stash away a little extra money each month.

On the other hand, if you want to get out of debt sooner, and you have other forms of debt besides the loan, you might want to devote extra money each month toward paying off your debts more aggressively.

To do this, most people choose a single debt to focus on and devote all of their extra funds toward paying it off. There are two schools of thinking in choosing the debt to target: the “debt snowball” and the “debt avalanche.”

With the snowball, you choose the debt with the lowest balance and devote yourself to eliminating it. You pay this debt off quickly and then use the additional funds to pay off the next-smallest debt, and so on.

With the avalanche, you choose the debt with the highest interest rate and work to pay that off first. This might take longer than paying down the debt with the lowest balance, but it can often save you more money in the end.

If you don’t want to use your extra funds to pay down debt, you should still be careful and responsible about how you spend. Treating yourself is fine, but building up your savings account is even better.

Understand why you fell into debt in the first place, and resolve to change

The most important lesson that you can learn from debt consolidation is figuring out why you fell so deeply into debt in the first place. By understanding why you got in so deep with your creditors, you can identify the behaviors that led you to fall into debt and resolve to change.

In some cases, there’s a single, easy-to-identify reason that you fell into debt. You crashed your car and couldn’t afford to get it fixed. You got sick and needed to cover your medical bills. The list of potential emergencies goes on.

In other cases, it can be much more difficult to point to a single decision and say that’s why you fell into debt. Often, debt is the outcome when someone tries to live outside of his or her means. You charged a new outfit, a new pair of shoes, a new gadget, and a night out on the town over the course of a month and a half. Alone, none of these decisions put you over the edge. Together, they created a debt load that was much more than you could handle.

Still, there are themes you can identify and change. Maybe you’re too free with your credit card. Maybe you can’t hold yourself back from signing up for a store credit card to get 20% off. Maybe you have a friend who is constantly pressuring you to go out and treat yourself regardless of the financial consequences; after all, isn’t life too short to be thrifty?

Be honest with yourself and figure out what really caused you to fall into debt; then, change it. If it was emergency spending, consider bulking up your savings account over time so that the next time something bad happens, you’ll be prepared. If it was irresponsible spontaneous purchasing, resolve to have more discipline going forward. You should also put some distance between yourself and your spending triggers. Hold yourself back from “just browsing” expensive stores or online shops. Set a limit for your leisure spending. Resolve yourself to only go out a few times each month, and once you hit your number, force yourself to say “no, thanks” when your friends try to negotiate with you. It might not be fun, but this kind of discipline is necessary if you’re serious about getting out of debt.

If you think you can handle all of this and make debt consolidation work for you, then now might be the time to research your options. National Debt Relief offers debt consolidation services to people in situations like yours all over the country. We’re proud to say that we really make a difference in people’s lives; check out our reviews!

4 Types of Debt Consolidation Loan Options

The year has just begun and you probably want to progress without any additional debt. Perhaps you wish to get a hold of your finances this year and cut down on spending. If this is so, then you should consider looking for a debt management system.

Besides there being a big number of credit management service providers, it would be prudent if you’d consider debt consolidation. This is a debt refinancing process that involves taking up a big loan to pay off small outstanding loans and debts. This has been shown to be an effective consumer debt management system and is therefore common in personal finance institutions.

Debt consolidation loans make debts manageable since you will be servicing one loan rather than multiple small loans and debts that can slip off your mind when due. Often, there are lower rates charged on the debt consolidation loan compared to the average rate on the multiple debts.

So, do you think that debt consolidation is your way out of a financial crisis? Do you know the most preferable or suitable debt consolidation process? Here are the 4 main types of debt consolidation processes:

  1. Consolidation through a debt consolidation company

Statistics show that there is an ever increasing amount of consumer debt. To help many people in need of debt relief or management solutions resolve or manage this, there has been a subsequent rise in the number of companies offering personal finance solutions.

One of the solutions or services provided by such companies is debt consolidation. You will easily come across firms exclusively offering debt consolidation. What happens is that you will receive advice on debt management alongside the loan. The company often pays off your creditors then you are left with one loan owed to the company. This gets your creditors off your neck for good, as long as you don’t accumulate any more debt.

The reasons why you should consider this option is because the resultant (new) loan charges lower monthly repayment since they’re charged lower interest rates. This option often saves money at the end of the repayment period.  If your biggest challenge has been forgetting to pay loans on time, the debt consolidation loan leaves you with only one loan that you can’t forget thus avoids default penalties and late fees associated with forgetting some payments.

Unfortunately, you will not enjoy the lower interest rates on your consolidated loan if your credit rating is poor.

  1. Balance transfer consolidation

Say you have several accumulated credit card debts; wouldn’t you want to transfer all those debts into one card with zero interest rate chargeable? The balance transfer consolidation option is an effective way to clear your credit card’s negative balances if you are certain that you will change your lifestyle and spending, and if you are certain that you will have repaid the debts fully by the end of the zero-interest rate period.

Most companies offering balance transfers on credit card balances give between 6 and 18 months. During this period, you should be able to repay the balances. This is an affordable option compared to normal repayment of a high interest credit card loan. You will, however, pay a transfer fee that is often between 2-5%.

  1. Home Equity Line of Equity Loan (HELOC) Consolidation

A debt consolidation loan is either secured or unsecured. HELOC consolidation is an example of a secured debt consolidation loan. In this case, your home will be used as collateral for the loan borrowed. This solution is effective because you can get a loan of up to 80% the value of your home.

Unfortunately, they do not have fixed terms since the value of your property is somewhat determined by the market. There is no control over external factors in finance. By securing the loan against your home, you will enjoy lower interest rates on the loan. Even though this rate will vary, it will be lower nonetheless. The other downside of HELOC consolidation is that you risk losing your home if you default payment.

  1. Peer to Peer (P2P) consolidation

This is one of the new debt consolidation processes. This is an option that allows people to lend money to each other through P2P lending companies. The P2P companies connect you with people with money they are willing to invest. The investor gains through the favorable interest rate that is charged on your debt consolidation loan. Besides the returns on investments and interest on the money lent, lenders also get satisfaction from helping people in need.

Compared to the loan you will get from the bank or any other financial or credit institutions, P2P loans charge lower interests.

The market is filled with all these options though caution is crucial when shopping for a debt consolidation loan. Some of the precautions you must exercise include:

  • Steering clear of scams

Avoid highly aggressive sales agents advertising deals that are too good to be true. You should also not sign contracts with companies that ask for any form of deposit for registration. Trust your gut instincts.

  • Work with reputable companies

Reputable companies have been in the market for a long time and they will offer the best advice. The chances of the company disappearing with your money are less and you can hold someone responsible. Look out for reviews, comments, and complaints on the company website and review sites to know if a company is trustworthy.

  • Get credit counseling

The reason why you are in debt is probably poor financial management. Do not get to the end of the year with more debt on your back. Create a budget and stick with it. Live within your means.

In conclusion, attaining financial freedom is a challenging but achievable vision. Talk to your finance planner and determine your best debt consolidation process. Change your lifestyle and learn to live without any debt on your back. You should also undertake sufficient research before signing contracts. Follow the advice above and your financial freedom goal will come true at the end of the year.

Recoup Your Finances by Availing Debt Consolidation Loan

It is not that you always need to be neck deep in loans to make you feel so much uncomfortable that you seek ways to get out from it. Even if the loan amount is not much of concern for you there is yet something very important that you want to protect. It is your credit rating that you can hardly allow to be dented. Modern lifestyle is highly dependent of debts for decent living. Debts have been wound around our lives and whether you like it or not, at some point in time you have to turn to it. Therefore, you know very well how good credit rating can make you a good candidate for getting loans. Hence, the need to protect it from getting tarnished, in case you happen to be defaulting with existing loans.

Issues with multiple creditors

Repaying capabilities are not always the reason why people fail to keep up with loan repayment schedules. Although it might be true for some people, most point to the troubles that they face in servicing several creditors. It is common nowadays that people use several credit cards and maintain several loan accounts concurrently. Each account has its own payment dates and consequently there could be several dates in a month when payments have to be made against the loans. This can become quite tasking for two reasons — firstly, remembering the dates is often difficult and secondly, keeping track of finances and allocating funds for timely payments needs close attention. Failed payments could directly affect credit scores that can further weaken the prospects of securing fresh loans.

Reasons for failure

On analyzing the situation that has been described above it will be easy to understand that the problem crops up from the number of creditors that have to be handled.  Each credit account has to be monitored individually to ensure that billings are correct because there are instances when some errors can creep in and add to your woes. Going through many bills every month at different times and matching with various payment dates are no less challenging. Moreover, funds have to be allocated to the accounts at the right time to effect payments. Taking everything together, it is a cumbersome task that can be quite stressful and even difficult to manage that often might lead to missed payments.

Looking for remedy

Considering the realities on the ground, it has to be accepted that you have to find out ways of living more comfortably with credits and managing debts in a smarter way. Although it would be ideal to seek a debt free life but it could be really hard to make it happen.  Rather, finding methods of coping with debts in a better way is a more practical way of tackling the problem.  There are three financial options that you can try out to resolve the problems faced with multiple creditors. All these are aimed consolidation of loans – dealing with a single loan account that replaces many. Read on to know about your options of consolidation.

Take personal loan

Taking out a personal loan can be thought about but it is far from practicable to make it work. Personal loans entail much higher rate of interest that could leave you paying more than what you have to pay now. The terms of payment may not also be favorable. It can affect your affordability and defeat the purpose of consolidation of loan accounts. Moreover, personal loans are given for smaller amount and the sum that it fetches might not be enough to pay back all other loans.

Line of credit against home equity

If you own a house, you can think about converting its equity value into a line of credit for obtaining some money to pay back other loans. While getting the amount you need is not a problem, the interest is also lower and the terms are also extended, it needs careful consideration to decide using this facility. The loan that you get is only for a portion of the home equity with the major part remaining unutilized. Since your home has the potential of bailing you out from much bigger financial crisis, exercising the options for credit consolidation may not be a wise decision.

Get a fresh loan specifically for consolidating debt

Loans are available for various purposes and are named according to it. There are home loans for home making, vehicle loans for buying cars and there is even a special category of loan for debt management which is known as debt consolidation loan. This is perhaps the most used option because it comes with some benefits that are just suited for the exercise. Unlike personal loans, this does not have any limits attached to it and can cover any amount of outstanding loans. It offers lower interest rates and favorable terms can also be negotiated. With the right attitude of using this option correctly to wipe out other loans, it is the perfect solution for consolidation that you have been looking.

Getting the best loan

In order to get the best loan for consolidating debts, there are some methods to follow.

  • Shop around – The money market is highly competitive and you should get a good bargain for the new loan that you will be taking. Do not be carried away by the face value of offers. Do a thorough analysis to understand what your benefits are and then shop around to get the best bargain.
  • Unsecured loan – Look for loans that are unsecured – that is available without asking for any collateral security.
  • Interest cost – While shopping around make sure that you get the lowest interest with favorable terms. This would help to save money through consolidation.
  • Costs and fees – Know about the costs that are associated with the loan – like closing costs that some companies charge. Also know about the fees to be paid, if any.

Conclusion –

Once you have identified the new lender, it is time to make use of the opportunity for not only consolidating the loans but using it to your advantage for recouping your finances.

Debt Consolidation and 9 Other Debt Repayment Strategies

Debt is a necessary evil for most people. Unfortunately, you will find that not everyone gets into debt by planning to take a loan and having a repayment plan. For most people, running into huge debts is a result of poor planning, financial misfortunes, and living beyond one’s means. For most of these cases, the problem recurs especially when the root cause of the problem isn’t identified and weeded out.

You may think that debt affects individuals and households only but the truth is that it affects businesses too. By spending too much on overheads while making poor investments, the company will most likely run into debt. Below are some of the debt management or repayment strategies:

  1. Creation of budgets

Everyone should know how to create a budget and if you don’t, then you should research online or even get a personal finance consultant or a credit counsellor who will guide you through the process of creating the budget.

There also are budgeting apps you can take advantage of and if you don’t fancy the apps, try out the traditional Excel spreadsheets. You will find that there are many miscellaneous expenses eating your income and savings resulting in debt.

  1. Deal with the high-interest debt first

The problem with a high-interest debt is that it puts your finances and your business into a high risk. These debts also take the biggest chunk off your income and can easily deplete your resources. If you have credit cards and one of them has a high interest repayment rate, you should pay it off before the rest because it increases your payment on the credit card with the highest APR. This will happen as you go on paying offthe debts with lower interest rates.

Student loans are often low interest debts that can be easily repaid once the high-interest credit card debts have been repaid. In some instances, it is allowed to transfer the student loan balances to the zero interest credit cards.

  1. Don’t brush off balance transfers

The most effective way of reducing your debt is by taking advantage of balance transfers. In most cases, the transfers are available for credit cards. Most credit card transfers are zero-interest rate transfers for balances and you can use this for the card with the highest interest rate on debt. You will be given a limited repayment duration during which the zero-interest rate is applicable. Take advantage of this to repay all your debts then.

  1. Always pay more than the minimum balance given

To reduce your debt significantly, always strive to pay more than what the minimum balance is on the monthly bank or credit card statements. When you do this, you get to prolong the payoff strategy. Whenever you can pay off the cost of the new office equipment with more than necessary monthly, do so. This strategy gets you out of debt faster.

  1. Debt consolidation

Is your company having many creditors to deal with monthly and is it becoming tougher to deal with all the debt monthly? Debt consolidation is a debt restructuring program that takes up all your current debts and repays them when you take up one loan to service. Instead of servicing many debts and dealing with several creditors sending you different invoices monthly, go for debt consolidation.

Fortunately, there are many debt consolidation firms around you with programs that suit you. With debt consolidation loans made easy, you can rely on the debt consolidation companies and credit counsellors for the best and the cheapest loans. You should however take your time researching on consolidation rates and fees. Don’t fall into scams and ensure that the company is certified and with verified positive reviews.

Debt consolidation is suitable for loans, mortgages, car loans, personal loans, student loans, outstanding bills, rates, taxes, etc.

  1. Debt settlement

Are you struggling to repay all your creditors who are out for blood? Perhaps you should take up debt settlement as a way to repay the owed amounts. Find a debt settlement company, talk to a credit counsellor, and determine how much you can save up monthly.

The debt settlement company will negotiate with your creditors and have them agree to a one-off payment of a percentage of the owed amount. You will contribute to an account set up by the debt consolidation company monthly.

  1. Cut down on spending

The cause of too much debt is unnecessary spending. To repay your debt and have a little extra money in your savings account monthly, you have to cut down your spending. Spending hurts your credit and your income significantly. Only buy what you need and avoid splash shopping. Stop carrying your credit cards around and save more. Practice frugality for financial freedom.

  1. Don’t waste your bonuses

Yes, you have earned the bonuses received, but when you have so much accumulated debt, it is important for you to consider using the earned work or project bonus on paying off debts. You may use the loan to pay off equipment debt, accrued leases, or even a student loan. Lump-sum payments attract discounts in most cases.

  1. Sell off unwanted items

Most of the things you buy are totally unnecessary. If you want to finish the year without any debt, spare the weekend and declutter. You will be amazed by the number of high-value but unnecessary items in your office or home. Auction these items online or have a garage sale. There are friends or acquaintances that may need the items, so sell them off and use the money to reduce your debt.

  1. Try micro-lenders and online lenders

If your business is in dire need of financing, but you have a poor credit history and score, you may consider micro lenders and online lenders. There are many legitimate lenders online or around you but you must research first.

 

In conclusion, there are many options for debt management but their effectiveness depends on your decisions and your willingness to stick to the programs. You should also change your habits, cut down spending and for a business, this might mean downsizing or allowing workers flexibility in working thus they can work from home and you won’t need a lease.

Debt Consolidation Made Easy: The Dos and Don’ts

If you are like most folks in the U.S, you are probably paying more than one loan. The Federal Reserve says that average household debt stands at $132,158 as of 2015. Average credit card debt is around $15,675 while mortgages, auto loans, student loans among others follow closely. The level of debt today is higher than it has ever been since the war and the situation is not getting any better. With a slow economy and global uncertainties, more people are expected to fall into debt.

is debt consolidation an optionIf you are repaying multiple debts today, you appreciate how hard this can get. You have to balance your income at a time when the cost of everything else is going up. This makes it easy to default and the consequences are grim. Credit card debts rate highly in the category of defaulted payments and this means a lot of people have bad credit profiles.

To manage your finances when paying multiple debts, debt consolidation comes in handy. The problem is that most people don’t know what this entails and many more have fallen for online scams. Most financial advisors recommended debt consolidation gives you a single repayment, which is easier to manage.

If you are struggling to handle multiple loans, it is time to understand the dos and don’ts of debt consolidation. Here you go:

The Dos of Debt Consolidation

While debt consolidation is a wise financial move, it is important to understand what you can do to get more out of the service. Here are a few tips:

Understand Debt Consolidation

When you start your online search for debt consolidation, you will come across many variations that providers still claim are the same. It is important to understand that debt consolidation involves taking a new unsecured loan to repay all the other debts you had. This means you will be making one single payment to your lender. This is different from debt settlement, debt relief and debt management.

Use a Reputable Debt Consolidation service

The internet has thousands of debt consolidation services and it can get tricky when you are looking for the best. However, you can use debt consolidation reviews to compare different services based on various parameters. These reviews compare the providers based on customer service, interest rates, registration and reliability. You should also check the BBB website for any complaints against a debt consolidation service you want to use.

Ask for Financial Advice

It is true that debt consolidation reduces monthly interest repayments, but does this apply to your case? Every loan is unique and a financial advisor from the loan provider has the expertise to help you understand how your repayments will be affected. Don’t just go for what the adverts tell you, but instead do the math or use a professional to help you understand the implications of the loan product you are buying.

Ask For Recommendations

If you have never used a debt consolidation service before, ask around for recommendations. There are many online scams that lure customers with debt consolidation promises only to start selling debt management or settlement. To avoid such, ask friends and family for recommendations. Remember the loan you buy will take time to pay and you need to use a professional company to avoid unethical collection methods.

Ask Questions

Before approaching any company, ensure you understand what debt consolidation is all about. There are many online resources which attempt to debt consolidation made easy and this is where you should start. Research about the different debt consolidation options and learn the pros and cons of each. When you start interviewing different lenders, ask as many questions as you can to guarantee you get the best service. The more information you have the better the choice you will make.

Check the Terms and Conditions

Most people sign loan contracts without actually reading what they are getting into. This leads to disagreements in future, which can be costly. To avoid this, read through the contract with your loan assistant and make sure you understand every item. For instance, make sure the repayment terms are clear, the penalties are well defined among other items.

 Assess your Finances

This should be the main consideration when you are thinking of debt consolidation. Will you be able to repay the single loan or will you default? Is it necessary to consolidate your debt and how much will you save? Such budgetary considerations will help you make the right decision.

The Don’ts of Debt Consolidation

Don’t Consider Debt Consideration as a final solution

Most people want a quick way out of debt and debt consolidation might seem like the panacea. However, you should understand that debt consolidation does not reduce your debt but rather helps you manage it better. You must remember that the original amount is still due and this calls for prudent financial management.

Don’t go for the Cheapest Service

There are thousands of debt consolidation services and they have enticing offers to lure customers. However, don’t always go for the cheapest services because they are not always the best.  You should check for the company’s track record and reputation before using their services. You should use top debt consolidation reviews to find the best service in terms of interest rates, reliability and customer service.

Don’t Rush

Just because you have seen an advert promising lower interest rates doesn’t mean you should jump at it. In fact, like any other financial decision, you need to take your time to avoid making a mistake. Take time to research about debt consolidation and check whether you are a good candidate for the service. You should also take more time to assess the benefits you will enjoy by using such services.

Debt consolidation is a prudent financial choice. If you are struggling with multiple debts at the moment, it is advisable to go for debt consolidation for lower interest rates and peace of mind. Managing a single payment is easier and you will find it less stressful to plan your income.

Achieving Debt Relief Through Debt Settlement

There are several different ways to achieve debt relief. If you have a decent credit history you could get a personal loan and use the funds to pay off all of your other debts. That way you would have consolidated your debts and would now have just one payment to make a month, which should be less than the sum of the payments you’re now making.

Another way to consolidate debts is by getting a home equity loan or home equity line of credit. Of course, you would need to have enough equity in your home that you would be able to borrow enough to pay off all your other debts. Again you should have a much lower payment than the sum of your current payments as well as a fixed term.

If most of your debt is credit card debt you might be able to transfer all of your balances to a new card with a lower interest rate or even better one of those 0% interest balance transfer cards.

If you owe more than, say, $7500 and can’t see any way to repay it within the next two or three years you might choose to hire a debt settlement company to handle your debts for you. For example, National Debt Relief has been able to successfully settle the debts of more than 100,000 families and individuals and has saved them millions of dollars in the process.

How we work with our customers

If you choose to work with National Debt Relief you’ll first talk with one of our debt counselors who will review your debts and explain how we handle debt settlement. To be a good candidate for debt settlement you must have had a financial hardship such as losing your job, having your salary reduced or being divorced so that it would be unrealistic to think you could repay all of your debts. An ideal candidate for debt settlement would owe more than $10,000 in unsecured debts with a balance of $1000 or more on each. Unsecured debts are those where you were not required to provide any collateral. This includes credit card debts, personal loans, lines of credit, past-due rent (if you no longer live in that house or apartment) and vet bills.

If you’re a good candidate

If it turns out that you would be a good candidate for debt settlement your National Debt Relief counselor will offer you a program designed to help you become debt free in 24 to 48 months. Assuming you accept the program you will no longer be required to pay your creditors. You will send National Debt Relief a payment each month instead of paying them. National Debt Relief will deposit this money into an escrow account that you control. When enough money has accumulated in the account we will begin contacting your lenders to discuss settling your debts. In most cases we are able to settle debts for about fifty cents on the dollar. Of course, we cannot guarantee this as every lender approaches debt settlement differently. In fact, there are a few that won’t discuss debt settlement at all.

When we are able to successfully settle one of your debts we will contact you and ask you to release the funds from your escrow account to pay for the settlement.

Why you can trust National Debt Relief

National Debt Relief has been in business since 2007. We are certified by the Better Business Bureau where we have an A rating. We belong to the American Fair Credit Council (AFCC), which is the watchdog of the debt settlement industry. To maintain our membership in this Council we are required to treat our customers fairly, honestly and transparently. As noted above we have helped more than 100,000 Americans find relief from their debts. And we are ranked number one for debt settlement companies on the site TopConsumerReviews.com.

How debt settlement will affect your credit score

, Whether you choose National Debt Relief or some other debt settlement company it’s important to understand that debt settlement will have a negative effect on your credit score. How much this will affect your score will depend on what your score was prior to having your debt settled but it is thought that it will lower it by around 80 points. Of course, if you owe $7500 or more and have been unable to pay your bills for the past several months your credit will already have been severely damaged so that the 80 points may not make that much of a difference. Regardless of this, debt settlement is better than a bankruptcy, which could lower your score by as many as 250 points and leave a stain in your credit reports that will last 10 years.

Get started today

If you believe you would be a good candidate for debt settlement, don’t wait. Call us today to get started. The very worst thing you can do is to do nothing, as your problem with debt is only going to get worse.

Three And A Half Good Ways To Get Debt Relief And One Terribly Bad One

Are you having such a hard time with debt that you just can’t see anyway out and that the whole idea of debt relief seems like a joke? Well, it’s not. There are ways that you can get relief from those debts – depending on how much trouble you’re in.

1/2. If you have a reasonably good credit scorewoman needs debt solutions

We call this the one- half way to achieve debt relief because it’s based on the fact that most of your debts are credit card debts and that you still have a reasonably good credit score. If this is the case you should be able to transfer the balances on your credit cards to a new one with either a very low interest rate or a 0% interest rate. If you could qualify for a 0% interest balance transfer card you’d not only consolidate your debts but would have anywhere from six to 18 months interest-free. This would give you time to get your balance paid down or even paid off, which would definitely provide debt relief.

1. If you own your own home and have some equity

If this is the case you should be able to get either a home equity loan or homeowner equity line of credit to pay off your outstanding debts. However, you’ll need enough equity for the 80% rule, which is that you will be able to borrow only 80% of your equity. As an example of this if you have $20,000 in equity you’d be able to borrow only $16,000. However, there are several advantages to this beyond the fact that you would have consolidated your debts. For one thing you should have a lower monthly payment than the sum of the payments you’re currently making. And you will have much more time to pay off the loan. In fact, the typical term for a home equity loan is 30 years and for a homeowner equity line of credit 10 years. The downside of this is that because the loan has such a longer term you’ll end up paying more interest

2. If you’re willing to invest five years to get debt relief

A third way to get relief from those debts is by going to a consumer credit counseling agency and getting a debt management plan (DMP). If you choose this option you will be assigned a debt counselor and the two of you will work together to create a DMP designed around the payments you can actually afford to make. Your debt counselor will negotiate with your lenders to get any fees forgiven and for lower interest rates. If your lenders accept your DMP your debts will be consolidated in that you will now be required to make just one payment to the service agency each month. In return, it will pay each of your creditors monthly. Your credit card accounts will be closed and you will not be allowed to apply for or acquire any new debt until you complete your program, which as noted above will probably take five years. But at the end of those five years you will be debt free.

3. If you can make monthly payments for 2 to 4 years

The third or fourth option – depending on how you’re counting – is to have your debts settled. When you hire a debt settlement company such as National Debt Relief you will end up paying only about 50% of what you owe. Your debt will be consolidated because you will now pay just the debt settlement company once a month instead of all your creditors. You may be able to choose from several different repayment programs but regardless of the one you choose it will take you anywhere from 24 to 48 months to complete your plan depending on how much you owe. Last but not least, the debt settlement company will take responsibility for interacting with your lenders and any debt collectors freeing you from those annoying calls.

4. The terribly bad option

The ultimate answer to debt relief is, of course, bankruptcy. Choose to do this and you might be debt-free in less than six months. However, do understand that not even bankruptcy will free you from secured debts like an auto loan or mortgage and certain types of unsecured debts. For example, a bankruptcy can’t discharge student loans, alimony, spousal support, family support and tax debts. Plus, it’s a terribly bad option because of the stain it would leave in your credit reports for 10 years. A bankruptcy might drop your credit score by as many as 250 points making it very difficult for you to get new credit for two or even three years. Having a bankruptcy on your record would probably increase the cost of your insurance premiums and make it more difficult for you to rent a house or an apartment. Many employers now routinely check credit reports before hiring an employee so a bankruptcy in your credit history could even cost you a job.

Think before you leap

As you have seen there are options for getting debt relief. What’s important is that you sit down, compare the alternatives and think things through before choosing one. Compare the pros and cons of each to make sure you choose the one that will fit you best. Depending on the one you choose you might have to live with it for anywhere from two to 30 years so be sure to think before you leap.