Debt consolidation meaning
Being in debt can be a huge stress on you and on your family life. Not being able to pay bills at the end of the month, family squabbles, and fear of answering the phone in case it is one of those continual harassing phone calls from creditors can all wear you out fast! So what is the solution? Well if you are in too much debt you end up with three choices, either in the worst case you declare bankruptcy, or you attempt to get yourself out by trying debt consolidation or debt negotiation.
Perhaps having lost confidence in finance companies you may be thinking that debt consolidation is just another one of those scams to get you into more debt. Well, maybe you should take another look….
What is Debt consolidation?
If you have been unlucky enough to get stuck in debt, for whatever reason, debt consolidation might be just the thing for you! When you consolidate your debts you group them together and negotiate with creditors a lower payment that is suitable for you. Rather than paying your debts in drips and drops, you pay back your debts in a monthly lump sum which can be up to 50% less than before. Recognized debt consolidators can reduce the high-interest rates you were previously paying and extend the payback time.
Debt consolidation helps you get out of the red as quickly as possible, eliminating fees for late-payments and reassuring your creditors. It can keep you far away from the expensive process of bankruptcy and give you freedom over your financial future. Don’t forget, your creditors want to help you out of debt too, so the system works hand in hand. Why put up with those harassing calls from creditors? Look into debt consolidation and find out about your options first.
How it works
Once you have chosen a debt consolidation firm, they will call your creditors and discuss your debts. They will negotiate on your behalf to try to get lower interest rates and lower monthly payments, and reduce or eliminate late fees. Then you have to decide to pay on time and stop building up credit card debts. The debt consolidators now control your credit, and you will no longer receive stressful telephone calls. If you are looking for the right expert's help to fix your credit score, gradually over a period of time your credit score can be fixed to the right numbers (888) 803-7889.
You may be wondering what it costs to consolidate your debts. Some debt firms do charge a fee, as part of the monthly payment whilst others do not charge fees or very low fees.
Debt consolidation, or debt loan consolidation?
There are two ways to consolidate your debts, either a debt consolidation company takes hold of your debts and rearranges them for you so that you pay less interest and lower monthly payments, or debt consolidators repay your debts and turn them into a new loan such as a second mortgage with lower interest rates and longer payback times, thus getting your creditors off your back and starting a fresh page.
Each method has its advantages and disadvantages. The first can charge you fees for their services and the second some say, may increase your debts. Taking a second mortgage, for example, can increase the sum of money owed and the risk of losing your home if you get too tied up in debt, leaving you with worse credit terms than before. But looked at in another way it could be the answer to get you out of debt saving you money on interest and taking the stress of repayment away. Debt consolidating services claim to know the market better as they have trained professionals with years of experience and have the best solutions and arguments to reduce your debts. They suggest that well-thought-out plans are much appreciated by creditors whereas loan creditors may not have inspected every angle of the existing debt.
Whatever you choose, consolidating your debts can improve your credit history, and your repayments will help you gain back credit points that you may have lost previously and get out of debt.
Credit card debt consolidation
Credit card debt can mount up quickly and put huge pressure on you and your family. Whether it be due to your overspending, unemployment, illness, or disability credit cards can soon lead you into trouble. A lot of consumers today don’t know the dangers of credit cards and will be easily led into spending large amounts because of the ease of payment using a credit card. Credit cards usually have very high-interest rates which can accumulate leaving you with large credit card debts. Consumers should take care to read the small print when signing for a credit card and learn about what happens if they pay late, what kind of annual fees they are going to have to pay, and if they will have fees for paying off credit card bills at the end of each month. Debt consolidation programs can help you get out of the vicious circle of credit card debt. Having outstanding debts can affect your credit report for the next 7 years, and becoming bankrupt can affect your credit report for 10 years.
What exactly is bankruptcy? We all hear about it happening to others so what is it all about? Bankruptcy legally wipes your slate clean of all debts, or reorganizes payment on different terms. Many people consider bankruptcy as a way out of their debts. It may be appropriate for some but it must not be forgotten that there are other solutions before taking this drastic step.
If you get to the point where you do not have enough money to care for your basic necessities, debtors will liquidate your assets to pay off your creditors. This gives you a fresh start but means that you can lose everything you own, including your house. However, you will not be able to get rid of any recent purchases of high-cost, student loans, child support, or property-executed contracts involving titles or liens.
People who have assets, they want to protect, or have too much disposable income can agree to a different sort of bankruptcy where they repay part of the existing debt, over a period of approximately 3-5 years.
When declaring that you are bankrupt it shouldn’t be forgotten that due to the civil court proceedings it will become a public record, and everyone has the right to check out their personal financial affairs. The fact that you are bankrupt stays on your credit report for up to 10 years and many employers will refuse to employ you because of this. Getting credit, insurance or even a house can be very difficult, plus you will have fees to pay to the court. Bankruptcy should be seen as a last resort and you would be wise to look into the services of debt consolidators first.