When creating a list of creditors, dont forget a single company or person. Include your car payments, mortgage, medical bills, overdue library books, student loan, utility bills, phone bills, cable bills, internet costs, magazine subscriptions, and anything else you might owe. Be sure to make a comprehensive list so that you can easily figure out what your next step should be.
There is no harm in comparison shopping for consolidation loans. The fact is that some financial institutions, or friends and family, may offer you a better rate than others. Whether it is a line of credit, mortgage, credit card or loan, compare the interest rate and terms and figure out which is the best bet. Consolidate all of your high interest credit cards onto one credit card with a reasonable interest level. If youve got multiple cards above 20% interest, you are paying way too much. That money going to interest could be helping you pay off that debt! Plus multiple cards means multiple minimum payments. Its best to attack one card alone if you can.
A home equity loan or a line of credit is a good option if your home is paid off. You can basically borrow money and use your home as a collateral. Borrow just enough to pay your debt off and make your loan payments on time. You can deduct the interests you pay on your loan from your taxes. Completely and thoroughly fill out the paperwork you get from your debt consolidation agency. You have to pay close attention. They will cause delays and cost you money in the long run. Do you own a life insurance policy? You may wish to cash it in to pay off the debt. Talk to your insurance agent and see what the cash value of your policy could be. Sometimes, you can use some of your payments into that policy to pay off debt.
Understand that different debt consolidation plan may have differing levels of fees involved. These fees can be rather costly, so ask about them up front before making any decisions. If it appears you are getting hit with a landslide of fees, you may be better off choosing a different option.
Focus on consolidation services that look at long term goals. Consolidators that offer a quick fix for your debt and credit woes may not get you the best results. Those that focus on creditors one at a time, improving your credit score with each successful negotiation, will wind up saving you money in the long run. Know what your position is on collateral before applying for a debt consolidation loan. If you dont have collateral of sufficient worth, the terms for your loan will not be as favorable. Without sacrificing your home, tally up your assets until you reach a number that satisfies the criteria for collateral and take it from there. Avoid debt elimination arbitrators.
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These companies love to claim that your debt can be eliminated, though in reality they know that only bankruptcy can result in total elimination. The best these companies can do is reduce the debt you owe. Surprisingly, this is no different than you could do by calling and negotiating with creditors yourself..
You should only use debt consolidation if you plan to put the maximum amount possible down on your debts every month. Yes, your overall monthly expenditures will go down, but that should only remedy the negative balance you have every month. Otherwise, use any extra money to put back into paying off your debt.
Try keeping and applying for those introductory 0% interest credit card offers in the mail. Consider the amount of interest that you may save via consolidating all that debt onto your new card. You must use caution, though. Keep to a plan that lets you pay off the transferred debt during your low interest period. Dont miss payments or you will make your interest rates go up drastically. Dont open multiple cards and keep one of your old ones with a small balance on it.
If you are looking towards debt consolidation to take of your bills, never fully trust a company that says they are non-profit, or you run the risk of being over-charged for the service. This term is often used as a disguise for predatory lenders and you could end up with very unfavorable loan terms. Make sure you reference them with the Better Business Bureau and also look for personal recommendations.