Is Debt Consolidation Right for You?

Debt Consolidation - It Can Eliminate Your Debt!

Debt Consolidation lowers your debt and can ultimately get rid of it. It is not just a loan or putting all your payments into one. It takes your current debts and turns many payments into one payment. This in turn will likely lower the interest rate on the debt. You will be able to pay off the debt sooner from having a lower interest rate. Your debt still needs to be paid off, but you will be doing so with your mind at ease as you focus on only one payment a month. Some of the loan helps that can assist you are Home Equity Lines of Credit, Home Equity Loans, Debt Consolidation Loans, Personal Unsecured Loans and Lines of Credit, Consumer Credit Counseling, Bankruptcy Chapter 13, and Debt Management programs.

We have listed some of the main areas where Debt Consolidation can help your reduce and eliminate your debt.

Personal Loans
Debt consolidation can be obtained without using your home and equity by receiving a Personal Loans or Personal Lines of Credit. They can be difficult to get and you usually need to have very good credit. Sometimes they must be obtained before you are in financial trouble.

Credit Cards
Debt consolidation using credit cards is combining the balances from all of you credit cards with a high interest rate and transferring them onto a low – no interest credit card. These credit card companies will usually provide low-no interest for a short time, enticing you to open the account. Watch out because as time goes by, the interest rate goes up, even higher than before. As you transfer many cards of debt to one payment on a new card, there can be damages to your credit. Be careful in choosing which credit card company to switch to and stick with it until the debt is paid off, so as to not harm your credit.

Home Refinancing
When you re-finance a home, a second mortgage is taken out. You are borrowing money from your home and your home equity becomes collateral to make the loan secure. Equity is what you first paid for the home and the difference of what it is worth. Financial institutions may allow you to refinance your home and consolidate your bills with a second mortgage if you have good credit or good payment history.

Consumer Credit Counseling (CCC)
Using a Credit Counselor allows you to sit with a specialist and decide together what is going to work best to pay off your debt. A counselor analyzes your debt and looks over a budget. They will then recommend which plan or program will help you lower your monthly payments and your interest rate. You will pay a fee to the Consumer Credit Counselor, but it will be worth the time and effort they put in to reduce your overall debt.

Debt Management Programs (DMP)
Debt Management Programs are designed to help your lower all of your monthly expenses. You will be assigned a Debt Manager to take over all of your spending for the month. While you are in the program, your manager will be given your income to spend where necessary. You will receive an allowance for everyday needs such as, food, fuel, entertainment, etc. All other income will be spent in a budget and it will be maintained.

Bankruptcy Chapter 13
Bankruptcy Chapter 13 is debt consolidation to a certain degree. Filing for Chapter 13 bankruptcy will tell the state court and judge that you need protection. Your debt is then paid off with the supervision of the government. It is usually within a 3 to 5 year time. Most of your fees, finance charges, and high interest is reduced, but the majority of your debt needs to be paid to the creditors. There are some disadvantages to claiming Bankruptcy Chapter 13, so consider all of your options before filing.