Consolidate Your Debt For Free

You have reached a stage of frustration and are finding it difficult to live under the burden of debt. Why not get out of it through debt consolidation? That is cumbersome and involves dealing with yet another agency. So why not do it yourself?

Yes, you can provided you have a plan and through this, you can put aside much needed money through reduced interest and come out free from debt.

Here are some tips to go about it:

1) Commit to yourself that there will be no further debt and get rid of the cards to start with. No cards mean no indiscriminate expenses and no unnecessary debt.
2) Make a list of all debt in an excel sheet and it should have the following:

a) Name of the lender
b) Current principal liability
c) The minimum payment due
d) The rate of interest
e) Contact numbers
f) Email and website

If you have any credit open, make a mention of that also. It will come in handy.

3) The next step is to commence checking with each of the card companies about their balance transfer offers. Make sure to tell them that you would shift the account if you happen to get a good offer.

4) Make sure that you maintain notes of any offer on the excel sheet and also check for any hidden clauses. Ensure that you verify delayed payment charges and the tenure of the low interest rates.
5) You need to be alert about a popular marketing plan to entice members with a low rate for the transferred balance with a commitment for a minimum amount every billing cycle. Any outstanding on this is charged at a higher rate, which is fine on the face of it but can be costly if you do not pay off your transferred balance. This is because the card company will levy the lower interest rate first on the transferred balance and not on the other one. This will continue till the balance is settled.

Now you need to choose the best offer and transfer all balances to this card. If you fall short, do not hesitate to ask for an increase in the credit limit. If that is also not provided, take the next best offer.

Make a note of when the special offer ends so that you are able to clear your balance transfers. This way you will not have more than 2 cards and will be able to manage your finances far better.

Most finance advisors would be of the opinion that you need to close the non functional accounts, but it is better to keep them for any major exigency that you might face in future. Just have the discipline to not use them. This way your credit rating will not suffer and you have the option of falling back on these accounts. This advice comes with a caveat that if you are unsure of your spending discipline, then you need to close them with immediate effect.

Do not make the mistake of mixing up the credit card debt with real estate collateral. Failure to pay will risk your house getting repossessed.

Follow the above steps and be your own master finance advisor.

Credit Reports and Debt Consolidation

Q: How will a debt consolidation program that I adopt to settle my card arrears affect my credit rating?

A: Taking up a debt consolidation program makes limited impact to your credit rating in the immediate future, but failing to adhere to the repayment schedule can make a significant dent in the rating. Normally, your overall payment history decides your credit rating.
If you cannot exercise discipline in spending, it makes sense to close your card accounts as it can make an already precarious position worse. Though this does not obliterate your credit history connected with these accounts, you at least do not get into further debt. The other disadvantage behind closing accounts is the reduction of the credit that you become eligible for and this could make credit agencies wary about your financial strength.

If you still want to take no chances and close accounts, terminate the recently opened card accounts. Keeping some of the older ones open improves your credit rating by virtue of the time you have had those accounts. Make sure that your letter advises the creditor about your intention to close the account. He should not be under the mistaken impression that the card company has closed you out.
You cannot escape some de rating to your score when you do take the assistance of a debt agency to settle for a smaller amount than your original debt. Credit rating agencies also do not take kindly to the event of your debt agency taking their own sweet time to settle your debt and that can lead to further de rating.

Can a debt consolidation program do me and my credit score any good?

A debt consolidation program helps you settle your debt by decreasing the amount you owe and by enabling lower monthly payments, since the rate of interest is much lower under such programs. They also structure card debt at constant rate of interest, instead of a floating one that existed before and reduce the payment obligation amount. You therefore get the benefit of a lower rate of interest, less debt to be paid and a longer tenure over which this amount needs to be settled.

Life certainly becomes simpler since you need to make one payment to one creditor on a certain date every month. The credit score will reflect this fact as you having settled some card accounts. You will do well to leave a couple of card accounts open to meet any exigency. The credit that you can get on those accounts will help you in times of need.

While debt consolidation does help you, it is important to remember that the accumulated debt has to be settled at some stage and it is best to not get into such a sticky situation in the first place through prudent financial management.

Debt Consolidation and Bankruptcy

When faced with a crisis, it is easy to throw in the towel and run away. The true test of character comes when you withstand the hardship and seek to resolve the issues rather than taking an escapist approach. Similarly, mounting debt and other burdens may be sapping you mentally, but instead of opting for bankruptcy and trying to be escapist, you must look for other options that can get you out of the mess.

This is important because what appears as a solution to your problems may be worse than the problem, in this case filing for bankruptcy will come back to haunt you in the future through bad credit rating and the fact that no creditor will advance any loan for the next 2 years is another negative. Hence bankruptcy should be the very last option and you must actively look at everything else to arrive at a solution.

Debt Consolidation Agency

That solution could be in the form of a debt consolidation body that can help you decrease your burden and get you out of the bankruptcy mode. The agency will allot you a counselor who has many years of experience in dealing with creditors. He will first discuss with you and get an idea of your assets and liabilities apart from details of your occupation. You will be required to submit proofs to support these facts.

He will now suggest a program which would be tailored to take care of your debt and if suitable to you would set up a meeting with your creditors to work out the new repayment schedule. The debt consolidation person will be able to reduce the interest rate as well as the monthly payment through extending the payment tenure. In some cases, borrowers have benefited by up to 70%.

Debt Repayment

After getting the creditors sanction on the new repayment schedule, you will be required to adhere to the schedule. This is a function of the terms the counselor has been able to negotiate with the creditors. Sometimes you may be required to make an application for a loan and this would be used to clear the existing debt. In future, you only need to start repaying this loan. You may also get this facility from the agency itself and they would then start collecting this repayment on a monthly basis from you. Your single point of contact will henceforth be the agency. You must however take care that you do not default on any payment that is due every month.

As you can see, all is not lost and you need not consider bankruptcy when you have an option like debt consolidation at your behest. It will certainly help you come out of the problem and is a far better option than filing for bankruptcy.

Debt Consolidation Help

While a loan taken through the debt consolidation route is very useful, it is necessary to be aware of the pros and cons of such an arrangement before venturing into it.

The debt consolidation arrangement works by merging multiple loans into one and involves repayment over a longer tenure. Consequently, the monthly payment is lower and places some cash in the hand of the borrower.

An example is when you have 2 loans, where the monthly payments are $50 each. You are therefore paying $100 per month. Through debt consolidation, the new creditor will take on the loans and give you one bill for about $50, which saves you $50 per month. In this arrangement, you have reduced your monthly payment to pay the amount outstanding over a longer period. If you had continued paying the individual outstanding at the current monthly payment, you would have settled the outstanding sooner.

Debt consolidation offers other options like student loans where multiple student debt can get combined into one and mitigate the hardship faced by the students in making high monthly payments. Inflation and costlier academics compel students to take multiple loans and it can become very difficult for them to repay. Debt consolidation, by its definition makes it easier for the students to repay by reducing the ticket size on the monthly commitments.

Many card members face a similar situation with the accumulation of debt on multiple card accounts. They can also opt for a consolidation debt where the monthly payment is again reduced and the creditor is a single entity. By utilizing the saving resulting out of this into repayment, the member can decrease the total debt against his name and hope to clear the entire debt sooner than later. Care must be taken by the member that he does not continue splurging on his card while this arrangement is in force. It will only make the situation worse.

The above benefits seem good but one has to be aware of the negative aspects of debt consolidation as well. They can send wrong signals to the lenders about the financial strength of the borrower. Other lenders may want strong security collateral before they advance any loan. Of course, this demand depends upon the overall credit rating as well as the loan amount sought by the borrower.

It is important for prospective borrowers to do some study on the various programs available in the market and the benefits of each before signing up. It is equally imperative to be aware of the hidden clauses to avoid getting into a worse soup.

Finally, it is important to recognize that any debt put off only provides temporary relief and the amount has to be settled ultimately.

Non Profit Debt Consolidation

People who have run up debt are looking at some program that will them solve their problem and debt consolidation offers them some hope. While there are many offers abound in the market, a borrower needs to choose the one for him after some study and typically a non-profit agency should be ideal for him.

Why do I say so?
Other agencies have a vested interest in making their own money out of such programs and what they offer may not always be in your best interests. Non-profit agencies do not have a vested interest and may end up giving you a good deal.
Free Debt Counseling
These agencies offer free advice and they also guide you through the process in a more transparent fashion. Information about the other aspects of the program enables you to plan your finances in future in a better manner and assists you to minimize damage to your credit rating. You cannot opt for any non-profit agency and need to do your due diligence before choosing one that will help you get out of the mess you are in sooner than later.

It is useful to be aware that non-profit services also has some cost and is not totally free. As long as this fee is nominal and affordable, you should not be unduly worried.

You need to insist on a credit counselor who will negotiate with your creditors after understanding your current financial position.
The counselor will send you an agreement. The agreement should ensure that your debt is decreased by about 40% to 75%. The responsibility of the agency is to merge debt, and ensure payment is made by the borrower every month.

The advantage you have as a borrower is that your payment obligation does not increase over time and you can settle the debt sooner than later. The saving you generate from a lower monthly payment can be reinvested into the repayment.
Such agencies help you to achieve the following:

• Methodology to restructure, and set financial objectives
• Plan to lead a better life.
• Save money to get the advantage of better buying power.
• Generate savings to improve quality of life.
• Structure and use information to get out of debt faster.

It is necessary to remember that a non-profit agency will help you achieve your goals only if you are disciplined enough to follow their recommendations and maintain prudent finance management. It is also important to make the repayment on schedule every month without default as it will erode the confidence levels of the creditor and put you in deeper trouble.

Online Debt Consolidation

A lot of people are fighting a daily battle to make ends meet. Some of them are under the mistaken belief that they are good at finance management and will be able to comfortably meet the growing expenditure. They do not realize that very often earning has not kept pace with the ever increasing expenses till it is too late to do much about it. Increasing and easy disposal incomes, easy access to cheap money through low interest rates, global consumerism and irresponsible usage of plastic money due to the fact that one can use the credit card for almost everything has led to debt getting piled up. They find it difficult to settle bills and this puts them under tremendous stress. A possible solution could be debt consolidation which may provide relief from all the anxiety and harsh calls from the creditors.

This option enables the facility to merge several payments into one entity at an interest rate far lower which results in the monthly repayment getting slashed. Since only a single payment is to be made on a monthly basis, the finance management becomes easy and with only one creditor to manage, one can be liberated from the irritating phone calls and mails,

Those not adept at handling their money prudently, fall into the trap of high debt caused mainly due to inability to service current debt, delayed payment levies. They need to become aware that they have a problem at hand at the earliest. Debt compounds an existing problem when you borrow and you are unable to repay it on time. This leads to the interest amount piling up in tandem with the principal. Faced with such a dilemma, it is better to consult a finance expert. This expert can guide one to initiate a debt management plan at the earliest which can result in savings as well as improvement in the credit rating. A weak credit rating could severely impact your chances of borrowing in future.

A debt consolidation program has two components:

a) Methodology to get out of debt.
b) Encouragement through the ease of repaying to one creditor.

Since this single monthly repayment to one creditor is much lesser than the multiple payments one would have made to the original creditors, the money saved enables one to make a greater contribution to the principal of the original debt rather than continuing to pay interest. A debt consolidation plan therefore assists one to get freedom from debt sooner.

Debt consolidation home loans enables one to offer one’s house as strong collateral and get higher loan amounts as well as lower rate of interest since the collateral is a secured one. The rates are higher on an unsecured one where there is no collateral.

What is Debt Consolidation

When one is in deep debt and the burden reaches a point of exasperation and tension, it is better to opt for an innovative financial instrument called debt consolidation. Very often the current loan is unstructured and involves high monthly payouts due to increased interest rates. With debt consolidation, the burden of two or more loans is merged into one single entity and that assumes the form of a personal debt. This form of consolidation typically results in a lower interest payment allowing you to save money on a monthly basis. The new structure also enforces discipline and a tight repayment schedule to enable you to settle the debt at the earliest.

You can connect into such a plan through an agency or through a classified consultant. Once you meet up with a qualified debt advisor, you will be able to arrive at a decision as to which is the best option for you. Under the debt consolidation plan, three options varying with the requirements of an individual exist – loan consolidation, loan management and the filing of bankruptcy.

Under the debt or loan management option, the consolidator will take on the burden from you and enter into a separate repayment arrangement with the lender based on their own credit rating. Typically, they already have existing ongoing relationships with these lenders like card companies, other collection agencies etc and are thus in a better position to negotiate terms. You benefit since the interest rates are always on the lower side as opposed to the one you are being levied and this results in significant monthly savings besides having to deal with only one creditor. Management of the debt is thus far simpler and tenable.

You need to be aware though that having entered into such an arrangement, you cannot operate any of your cards barring one for any exigencies. The positive feature is that you will not be troubled by the different creditors and need to deal with only one, making sure that you do not fall back on the repayment schedule agreed upon.

You need to read the fine print of the arrangement and make sure that the new debt tenure is not an extended one, as that will mean that you end up paying far more. Moreover, do not offer your house as collateral. It can be repossessed in the event of any default from your side.

The repayment schedules are normally agreed upon for tenure of 5 – 7 years. Unfortunately, even this schedule is not always maintained and adhered to due to changing economic conditions and bad after sales service.

You can look forward to a commission which would be approximately equal to the first monthly payment under the new plan. There is a component of administration fee that also needs to be paid. This could be a flat charge or a percentage.

To sum up, a loan consolidation plan works well for people struggling with interest rate payment of over 18% or are into the credit card trap.

Small Business Debt Consolidation

Modern cost pressures and inflationary trends have taken their toll on the commercial viability of various businesses and many entrepreneurs are finding it difficult to keep pace with mounting expenses and remain profitable.

This led to close to 2 million businesses filing insolvency in the year 2006. The repercussions are that the credit rating takes a huge beating and customers and even vendors tend to lose trust. Recovering from such a debacle is very difficult if not impossible. The advice therefore is not to file insolvency and look for other avenues to restore credibility. Many financial instruments are available which can mitigate the debt problem. One needs to know about these options and exercise them. More importantly, it is also necessary to learn from the experience to avoid repetition in future.

The finance market does offer innovative small business debt consolidation options tailored for small business entrepreneurs, who help them, overcome crisis and also provides valuable inputs to prevent any recurrence. Relief is offered in the form of consolidating the loans into one where the interest rate is lower and management of the debt through one liability is easier. The payout on a monthly basis is far lower and is not daunting. The various loans that qualify in this category are loans on the card, apprentice loans, etc. Businesses can consider a variety of small business debt consolidation programs which can assist them manage their debt efficiently and not force them to file for bankruptcy.

The crux of the issue is to achieve relief from the high interest rate at the earliest. Two options, such as the secured and unsecured loans are on offer. The former is lent at a lower interest rate due to the collateral that backs the loan as opposed to the latter, which does not have any collateral backing it and hence comes with a higher interest rate component. It is recommended that you place real estate as collateral as it is always has a value you can fall back on in times of emergency.

The other option is to choose a debt relief schedule wherein the burden is consolidated and repaid over a period of time. This ensures that the debt is spread across a tenure and since the monthly payment is a far lesser amount than what you would have otherwise paid, you have surplus funds that can be utilized effectively.

One must recognize that these options are not a total fix it solution to your debt problems. It only provides you some temporary relief and lessens the repayment burden to some extent. Debt that has been accumulated has to be settled one day and there is no escape.