||Debt Consolidation - Consolidate Your Debt
By Ronnica Rothe
When your debt starts to get out of hand, it might be time to consolidate your debt. Debt consolidation can provide you with the help you need to pay off your debt and obtain financial independence.
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When a company offers debt consolidation, they could be offering any one of a number of different things. You will want to make sure you understand what is being offered and know if it is a good option for you before you accept it. Beware of any one who is trying to push a particular program on you or pressuring you to make a quick decision.
Often when people think about consolidating their debt they are considering a debt consolidation loan. These loans can be helpful because they allow you to pay one consolidated payment. However, the lending institution will weigh how great a risk it is for them to give you the money to pay off your debts, which could leave you with a high interest rate on your debt consolidation loan because of poor credit. You may even be offered a higher interest rate than you pay on your current debt.
Unless you can reduce your overall finance charges, using a loan to consolidate debt may not be a good option. It simply does not pay to consolidate multiple debts into one loan with a higher interest rate. It might sound easier, but you pay more for it.
A way to consolidate your debt with the same benefit of one consolidated payment but without the high interest rate is a debt management plan. Debt management plans allow you to cut the fees on your accounts and consolidate the payment into one. The debt management company will provide you with the accountability you need to pay off your debt.
It can be difficult to determine what debt consolidation option might be right for you. Talk to an accredited credit counselor to determine how best to consolidate your debt, or even if another option might be better for you. A counselor can also show you other measures you can take to supplement debt consolidation.
Ronnica Rothe graduated Magna Cum Laude from the University of Oklahoma. She is currently enrolled at Southeastern Seminary in Wake Forest, NC.
She is a regular contributor to educational information disseminated through Personal Financial Network. Related information can be found on debt consolidation from Personal Financial Network.
The importance of debt consolidation loans can be best understood by people who are suffering with bad credit history. Debt consolidation loans for people with bad credit provides a manner in which they can prevent their financial condition and credit status from further deteriorating.
A debt consolidation loan replaces several small and big debts that a particular person might have incurred. Under this arrangement, a single loan is used to repay all debts of the borrower. Since the loan taken at this instance is not immediately repayable, borrowers get enough time to prepare for repayment.
Borrowers are referred to as bad credit when they have defaulted on debts in the past. Mortgage arrears, County Court Judgements, Individual Voluntary Arrangements, all count towards tarnishing the borrowers’ credit history. Credit history of borrowers is referred to in order to get data about the credibility that a borrower enjoys. A bad credit history would thus imply that the borrower has lesser credibility and thus make him a bad case for debt consolidation loans.
This however is not so. Borrowers with bad credit history are also considered for debt consolidation loans. The logic behind this is that by taking debt consolidation loan, the borrower with bad credit history is making positive efforts to change his/ her credit status. Thus, debt consolidation loan is readily available to people with bad credit history.
A slightly higher interest payment is what you are required to make on the debt consolidation loan if you have a bad credit history. You however need to distinguish between lenders who are charging the justifiable rates of interest and those who aren’t. The task is not as difficult. Just see what other lenders are offering to borrowers with similar circumstances. If that is not enough, you can request a select group of lenders to send their debt consolidation loan quote. The quote provides information about the rate of interest that will be charged, the period for which the loan will be offered and other important terms on which the loan will be granted. It is certain that on comparison, a few quotes will be rejected and some will be selected for further screening through several processes.
Once a debt consolidation loan provider is selected, the process of eliminating debts is initiated. The first step in any debt settlement process will be to make a list of the debts. The list must be as exhaustive as possible so that all debts are included.
The list of debts with the persons to whom each debt is due and the interest rate that each carries will be supplied to the loan provider. Debt consolidation loans have a special feature that borrowers are guided in the debt settlement process. The guiding principle of every debt settlement process is to save maximum for the debtor. Only through a proper negotiation can creditors be forced to write off a particular debt or a part of it. Borrowers do not have the necessary time and skills to make this happen. Thus, the service of the debt consolidation loan provider becomes necessary.
Alex Jonnes is financial expert working at http://www.easy-debt-consolidations.co.uk. He is a resident of the united kingdom (UK). He is Masters in Business Administration (MBA).