What Are Your Debt Consolidation Options?

Accumulating debt should not be ignored. When debts pile up, so are the interests that go with it. Even if you have the means to eventually pay off all your debts, chances are, you will be paying more than what you should by overlooking the consequences. By forestalling payments, you are forestalling the opportunity to be debt-free. Prevention is better than cure. Here are some options available for you as you decide on consolidating your debt.

Steps to Debt Consolidation

Take an inventory on all your debts. Make an inventory of all your bills. You can divide your bills into two categories: the essentials and the expenses on payment terms. The first category will include all your necessary expenses such as utility bills, food, fuel, car amortizations, and your insurance bills. The second category will include all the expenses you have made under a plan. This usually involves credit card expenses. Then note the total amount of these bills, the due dates, the minimum payment required, and the interest involved.

Video: Understanding How Credit Card Payments are Applied

Opt for moderation. Choosing a modest lifestyle will not only make your lifestyle simpler but it will contribute to reducing your bills more. If you deliberate on the kind of lifestyle that you can live with for now as you pay off your debts, it eventually becomes a pattern. This will help your bills stay at a minimum and you will have more money to pay your debts.

Start small. You can settle for paying your minimum payment first. This way, you are curbing the risk of accumulating higher interest for unpaid minimum bills.

Consolidate your debt. If you are experiencing difficulty in paying off your minimum dues, you can start consolidating your debt. Find a debt consolidation service provider near you. Some credit card companies are offering consolidation on low interest as compared to paying several sets of debts at different interest rates. Keep in mind, however, that these companies impose fees for their services. Another important factor to consider is the length of time that you can qualify for this interest. But if you think you can manage without such a service, you can learn some strategies by yourself too.

Steps to Debt Settlement

Check your unsecured debts. More often than not, you have an idea of how much your unsecured debts have summed up. However, if you have a vague idea, you can request for a copy from a credit agency.

See of you qualify for debt settlement. Some companies have a minimum requirement before they will offer their services to consolidate your debt. Some companies require consolidation for debts amounting to at least $7,500. Important to verify the requirements laid out by these companies and check if you belong to the category.

Search for debt settlement companies. You should not settle for the first debt settlement company that comes your way. More importantly, you should find the best options possible for you. Compare prices and terms from several companies before deciding to choose which service you will avail. You plan to eliminate your debts. The process should not entail unnecessary expenses.

Consider the expenses involved. Availing the services of a debt settlement company involves fees. In order to find out if you have the budget for it, you can check the difference between your monthly income and monthly necessities. If the figures are bad, then you should not consider availing debt settlement services.

Debt Consolidation vs. Debt Settlement

Debt settlement and debt consolidation may be perceived similarly. However, they are hardly the same. Stark distinctions rule each process. Debt consolidation has a prior arranged debt repayment scheme that coordinates with majority of the credit card companies and collecting agencies. This becomes handy as you are provided the means to pay your debts at lower interest rate for your monthly dues that were agreed upon with your creditor.

Debt settlement on the other hand, occurs when debt consolidation proves to be difficult. Usually, failure to pay the minimum amount for at least three months under a debt consolidation plan will lead you to settle your debts. This process will eliminate periodic payments to your creditors while your debt settlement company will place your monthly payments in an account or in your account over time. The company will try to negotiate with your creditors to reduce your payments to almost half of your dues. Upon agreement, the debt settlement company will make one full payment of your debt from the created account.

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Personal Loans

Personal loans can also serve as an opportunity to consolidate your debt. This kind of debt is generally unsecured, with the bank or lender estimating the amount they can lend on your monthly income. Personal loans are often procured by borrowers for a variety of reasons and for different expenses. If you have plans on securing one, deliberate over it instead of acting on a whim. Ask yourself if your expense justifies the act of borrowing. While personal loans are easier to secure, the issue of paying on time still remains.

Bankruptcy Option

Filing for bankruptcy can also be an option, although least advisable. While filing for bankruptcy will reduce a significant part of your debt, the act has its disadvantages. For one, bankruptcy will negatively affect your credit score, which leads to difficulty in subsequent credit transactions. But one of the advantages spares you from losing all your significant assets. But not all bankruptcy is the same. See if you are covered either by Chapter seven or thirteen.

For more information, here is a list of offices and contact details:

Federal Trade Commission
Toll Free: 1-877-FTC-HELP (1-877-382-4357)

U.S. Trustee Program
202-307-2759

MyCDC.org
Rachel Smith

Rebuild.org

Newport Financial Services
Toll Free: (888) 243-7888

Consolidated Credit Counseling Services
Toll Free: 1-800-320-9929

Money Management International
1-866-889-9347

United Way of Connecticut
860-571-7500

American Financial Service
1-800-931-4237

Debt Relief Services
1-877-750-4091

Debt Reduction Services
Toll Free: 1-877-688-3328