Debt Consolidation Help, Know the Facts!

Before you go looking for debt consolidation help, you need to know exactly what your options are. There are a lot of people looking to take advantage of someone who is struggling and doesn’t recognize a scam. Relief from your debt and future financial freedom are attainable, but don’t get caught up in a situation that takes bad to worse.

First, what does debt consolidation mean?

Consolidation is the process of taking a bunch of bills and putting them together into one payment. Usually, the payment is lower and the desire is to decrease the interest rate as well as the amount of money you are paying for debt each month.

There are two ways of achieving debt consolidation. The first is a debt consolidation loan. Your ability to get a debt consolidation loan used to be contingent upon home ownership. If you didn’t own a home, lenders were not willing to take a risk to help you get out of debt. Today that is not so much the case. It is possible to get an unsecured loan to consolidate your debt. Some lenders will pay off your creditors directly with the funds from your loan. Others will give you the money for you to pay off your debt. If they hand you a check, PAY THE CREDITORS! The last thing you need is to blow your consolidation loan on other things and then owe the creditors and the bank that gave you the loan!

If you are thinking about applying for a debt consolidation loan, make sure you qualify for a lower interest rate than you are paying to your creditors. Paying a higher interest rate will only increase your payments and the time it takes to pay the bills off.

The second way to consolidate your debts is through an agency that works with you and your creditors. These agencies will negotiate with your creditors for you. The process works like this. You sign a contract with the agency. The agency lets your creditors know what you are doing and that they will be working with you to help you pay down the debt. Then you make one lower monthly payment to the agency. The agency then disburses payments to the creditors as agreed in the contract. Usually your creditors will not bother you anymore-unless you begin missing payments-and all your communication goes through the agency.

Second, what is different about all the agencies out there?

This is where a word of warning is necessary. There are companies that are not legitimate. It is up to you to know everything you can about the company you are thinking about using. If the only contact you have with a consolidation company is over the internet, you need to run, not walk, run the other way.

Legitimate agencies have advertisements on television and radio programming. You’ve seen them. These companies can also be investigated with the Better Business Bureau. Don’t feel like you have to compromise your values or principles in order to consolidate your debt. There are companies that will meet your needs without trampling on your values. Visit several companies. Sit down and look their counselors in the eye. If you are comfortable and have read all the fine print in the agreement, sign with them. If not, move on. Your financial well being is at stake.

Most of the consolidation agencies will offer free credit counseling services. In fact a lot of them will require you to take advantage of these services as part of your consolidation agreement. Don’t be turned off by that. They are only trying to help you figure out how to live on what you earn so you don’t end up getting right back into uncontrollable debt the moment you get out of it.

If you are thinking about consolidating your debts, know if you want a loan or a consolidation service. Research the rates available to you and compare the pros and cons of each option. Look into every agency you are considering and ask them questions about the way they do business and why you should use their services.

The best thing you can do for yourself during a time of financial vulnerability is to be prepared. Investigate every claim a company makes about how it can help you. Read all the fine print in every contract you are presented with. Don’t let someone pressure you into a decision because you feel the walls closing in and their promise sounds good. Research it and verify everything you hear and read.

Financial solutions are available in these tough times. Being in debt does not have to be a life sentence. Debt consolidation is a viable option for a lot of people. Be smart. Understand your financial situation, and know the facts before you go looking for debt consolidation help.

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