These days there is no shortage of ways to help you make money. But the managing and the proper investment of money have got the people flummoxed. Debt consolidation, according to NationaldebtRelief.com, is a way to merge all your debts, which makes it more manageable and allows you to stay on top of the payments.
Let us start by answering the simple query – what exactly is debt consolidation?
In simple words, it is a unique financial strategy that allows the integration of multiple unpaid dues and bills into a single debt. Once you are done with the merging bit, you can now pay off the debt by a separate line of credit or through a readily available management plan.
Debt consolidation is a great idea
You must be thinking that it won’t be worthwhile to take a loan to clear the past dues. No, debt consolidation doesn’t push you back to the square one; instead, it has proven to be an excellent option when it comes to clearing the unpaid dues on high-interest loans and credit cards.
Consolidate the debt and go for a low-interest rate loan to pay it off. Here, you are substantially reducing the amount you need to shelve every month to pay back the dues. And it’s not just that as this unique “relief from debt” option allows you to untangle the mess created by multiple bills and deadlines.
Debt consolidation to save money
Before we begin, let us put all the information out there. There are two types of debt consolidation. The first is where you need to take out a loan to clear the dues and the second being the signing up with a debt management program. You can make a choice depending on the type of financial crisis you are facing. According to experts, debt consolidation, also known as a bill, or credit consolidation effectively rids you of debt, lowers the monthly payment, and positively affects the credit score.
Why does it work?
The answer is pretty evident and straightforward. Debt consolidation works because you are lowering the interest rates and reducing the monthly payments for high-interest credit cards, property, and auto loans.
Before you go for a debt consolidation plan, all you need to do is carefully calculate your net debt for all the credit cards. You need to make a mental note of the total expenditure for loan repayment per month and the net interest rate. Compare this with the debt consolidation plan and go for one that suits your requirements perfectly.
Here is how to make debt consolidation work.
The first step is to ensure that you have a monthly budget. Here, you need to take into account the cost of all the necessary amenities and requirements. Once you are done, you need to calculate what you need to keep aside for making the payments concerning your debt.
If you are good at budgeting, then you might find the motivation to devise money and debt management strategies on your own.
However, in case you think you need professional help, then look up debt management companies and organizations that offer consolidation plans. Leverage the power of the internet and research online for the right expert today.
Now, let’s take a look at the two basic types of debt consolidation
Consolidating with a loan
Various lenders offer you a debt consolidation loan. The options include banks, credit unions, and online/offline lenders. Keep in mind that you need to go for a loan that is large enough to clear all the consolidated unsecured debts.
While repaying the loan, the general rules apply where you are required to make the monthly installment payments. You can negotiate on the interest rates with the lender. You can make the repayment in 3 to 5 years, but it all depends on the rate of the interest.
Since lenders will look at the credit score as well while verifying your application for the loan, here is what you need to keep in mind. If you have fallen behind scheduled payments on credit card loans, it will get reflected on the annual credit report.
Always follow the general rule of thumb for debt consolidation. Which is, if your consolidation loan’s rate of interest is higher or equal to what you were paying for the credit cards, then it is no good for you.
Consolidating without the loan
However, if the previous consolidation option is worrisome for you, let us assure you that there is another way of consolidating. An option where you do not need to take out a loan. There are credit counseling agencies that work for no profit and helps you reduce the monthly payments and lower the rates of interest.
How does a non-profit credit counseling agency help? Simply put, by the powers of persuasion and negotiation. Sign-up with a non-profit credit counseling agency and let the officials help you by reducing the rates of interest and the monthly payment for the dues. Control your expenditure and make the entire thing affordable with this option.
Keep in mind that this is not a quick solution to all your problems. It will take you around 3 to 5 years to get ahead of all your debt with this option. This works by you making a monthly payment to the credit counseling agency which is responsible for distributing the fees to each creditor as previously agreed upon during the negotiations. Never miss a payment with the credit counseling agency as your customer privileges will get revoked.
If you are still asking yourself about consolidating the debt, then let us put the debate to absolute rest. In case you are tired of rising dues and interest rates per month. If the anxiety and pressure are adversely affecting your health and mental well being, then debt consolidation is a strong contender to alleviate all the debt troubles and anxiety issues. Turn your financial life around and avert the crisis today.