The number of people who get buried in debt is ever growing. Because of this, many are also being introduced to the practice of debt consolidation as a means to save themselves from future financial troubles. If you wish to consider consolidating your existing debt, here are the basic things you must know first before doing so.
• What it is?
In a nutshell, debt consolidation is a procedure that involves merging several unsettled debts with high interest rates into a single monthly payment.
• Debts that can be consolidated
The following are the types of bills and loans that you can properly settle through debt consolidation:
1. Payday loans
2. Unsecured loans
3. Hospital bills
4. Utility bills
5. Credit card bills
• When to consolidate debt
How would you know if you’re in a situation where your best bet would be to consolidate all your debts? Here are some indicators:
1. Often missing payments
2. Recurrent late payments
3. Inability to settle multiple bills simultaneously
4. Daily or frequent creditor calls
5. Use of credit cards for bills payment
6. Short of or no cash
7. Need to get cash advance loans
Experiencing even one of these financial difficulties means that you are already in need of a good debt consolidation plan.
• Its effect on credit score
As with any other debt relief program, debt consolidation will not directly improve your credit score. However, because it helps your credit report recover from negative reports, your credit score and rating will positively increase with it, provided you don’t incur new debts and you settle your monthly payments regularly.
Although it is the safest and easiest way to get out of your mounting debts, there are many other debt relief options other than debt consolidation.
1. Debt Management – This is a plan that allows you to hire the services of a debt management or credit counseling agency, which will be responsible for negotiating with the creditors to lower your unsecured debts’ rates. Afterwards, they’d be able to develop an alternative repayment plan.
2. Debt Settlement – In this plan, the debt settlement agency will negotiate with the creditors for a lower payoff amount so you can more easily overcome your debt.
3. Personal Bankruptcy – This plan should serve as your last resort, because it will get you out of debt but greatly damage your credit score by at least 200 points.
Nobody wants to have debts, but sometimes, it can’t be helped. If you ever get into a position where you’re knee deep in debt, always remember that there are several options and plans you could choose from to get you out of your situation. Although it is true that you can always try and settle the debts by yourself, it is still best to seek the aid of a professional. This way, you can be assured that not only would you be able to get rid of future calls from your creditor, but you’d also be confident that your debts will be dealt with the soonest and most convenient way possible.
Get out of debt with our debt consolidation and debt negotiation services.