Drowning in debt? Is the answer debt consolidation? or is this “Robbing Peter to Pay Paul”? or just giving you some “More Rope” while you sink in the abyss of consumer debt?
Debt consolidation is a great strategy to solve your debt situation. It involves combining your multiple credit accounts into one. There are different ways that this can happen. You can use a credit card, get the help of a professional, or you can use a loan.
National Debt Relief says there are three main reasons why you would like to consolidate your debts. The first is to restructure your debts and simplify it. The second reason is to improve the terms of the loan. The third reason is to save money.
Sometimes, those who consolidate debt do not get all three. But if you can successfully achieve one of them, you are one step closer to solving your credit issues.
The thing is, you can get a lot more from debt consolidation if you try to understand it thoroughly. You can learn great techniques when it comes to paying off debt.
In the end, it is important for you to realize that solving your debt situation is more than just paying it off. You have to learn a couple of lessons and financial habits. You need to make sure that you will not commit the same mistakes that will land you in another debt pit in the future.
Know your debt and finances before consolidating
One of the first lessons in consolidating debt is to understand your credit situation before you consolidate. As much as debt consolidation is a great way to deal with your credit issues, it is not the only way to do so. For instance, if you are in the midst of a financial hardship, this may not be enough to solve your debt problem. This debt solution will still require you to pay off everything that you owe. If you cannot do that, then you need a debt reduction – and not just consolidation.
This is the reason why it is very important that you look at your credit situation first before you finalize your decision to consolidate your credit. Do not just look at your capability to pay off the debt. You also have to look into the type of debts that you owe. Once you have a firm understanding of your financial situation, you can make a smarter debt relief choice.
List down all the debts that you owe – including all the details. Take note of the interest rate, due date, outstanding balance, monthly payments, and other fees associated with each debt. After that, you can proceed to look at your budget plan. If you do not have one, now is the right time to create a plan that will complement your plans to consolidate debt.
Unless you complete this analysis, you should not consider any of the debt relief options before you. The chances of choosing the wrong solution are higher if you do not know your current debt and financial situation.
Consolidate debt to keep things simple
This is one lesson that most people fail to understand. If you want to keep yourself from making a mistake when it comes to your debts, you need to keep your debt simple. Do not use credit without a plan to pay it back. Keep yourself from borrowing left and right. Being impulsive in the use of credit can quickly spiral out of control. Once it does, you might find yourself unable to keep up with all the payments. That can lead to all sorts of problems that can affect your monthly budget and your credit score.
The truth is, debt is not really the problem. In fact, debt can be used to improve a financial situation. The only reason why credit becomes is a problem is because of how we choose to react to it. In most cases, it becomes a financial problem because we made the wrong choices in the way we managed our debts. Sometimes all the wrong choices led us to the bad financial situation that we are in.
Most of the time, simplifying debt is the key to helping you solve it. This is what debt consolidation can do for you. It will allow you to simplify the multiple credit accounts that you have by combining it. Take note that it will not pay off the debt. But it will restructure your debt so the repayment plan will be much easier to accomplish. Once you have simplified the payment process, it should be easier to stick to your monthly contributions. Just make sure that the new terms that you will aim for will be aligned to your financial goals.
Consolidating debt does not involve a quick-fix
Most of the time, solving your debt does not involve a quick fix. It is rarely effective. Those who offer a quick fix for your debt situation usually has a catch. It will either make you pay more or it can ruin your credit history. There may be other effects that will depend on your unique debt situation.
This is why consolidating debt is one of the safest and most effective ways to solve your credit issues. It does not offer a quick fix. In fact, it does not promise shortcuts in the payment process. What debt consolidation will do is to make the payment process easier so you can complete it. Sometimes, you will encounter debt solutions that are easy and a perfect fit for your financial position. However, it will only be effective if you complete the repayment plan. If you stumble and stop making payments, you cannot successfully solve your credit issues.
If there is one thing that this debt solution will require of you – it is perseverance. In most cases, this option will make you pay for all your debts over a longer term. This is the only way that you can lower your monthly payments. While the low monthly contributions can be appealing, it will make the whole process slow. You need to control and discipline yourself so you will stick to the new repayment plan until the very end.
Soon, this control and discipline will be the same financial attitude that will hopefully keep you from committing future debt mistakes.
Debt consolidation is all about negotiating
Since consolidating debt is all about restructuring your credit, you will find that negotiating skills will come in handy. Regardless of what type of consolidation strategy you will follow, there is some form of negotiation that will happen.
If you will use Debt Management, the credit counselor that will help you out will negotiate with your creditors and lenders. They have to agree to the Debt Management Plan that you created with the credit counselor. This plan contains your new payment proposal. This will be presented to your creditors and lenders for approval. If they cannot accept, that is when the haggling happens.
When it comes to balance transfers and debt consolidation loans, you will not negotiate with lenders or creditors directly. However, some negotiating skills will still come into play. Both a balance transfer card or debt consolidation loan have fixed payment terms and interest rates. It is up to you to choose the right account that you will use to consolidate your debt. Your choice will depend on what your budget can afford. In a way, you need to negotiate with your budget to know how much monthly payment you can afford.
There are a lot of skills that you can learn from negotiating your debts. For one, it is important that you know your cards well. That means having adequate knowledge of your financial and credit situation. But not only that, you have to research who you will be negotiating with. By understanding them, you can create a strategy that will help you win in the negotiation process. Hopefully, that will lead you to solve your debt troubles.
Get help to consolidate debt when needed
Not all debt consolidation strategies can be done alone. Balance transfer and debt consolidation loans are options that you can do on your own. However, there is one option that will require the aid of a professional – Debt Management.
This option will require you to enlist the help of a credit counselor. This debt expert will help you analyze your current debt and financial situation. They will try to educate you on what you did wrong. The financial education part is usually free. If you want to ask them to help you create a Debt Management Plan, you need to pay them for that service. This plan will contain your proposed repayment plan – something that your budget can afford. They will help you present the DMP to your creditors and lenders and get them to agree to the plan. Once they agree, you only have to give the credit counselor the total monthly payment and they will take care of disbursing the money to your different creditors and lenders. This is a great way to simplify your debt situation.
You see, sometimes, people can afford to pay off their debts. However, their time and lack of knowledge about debt consolidation put them at a disadvantage. This is when hiring a professional becomes a great strategy to get out of debt. If you are lucky, they may even be able to help you lower your interest rates.
Even if you decide to do things on your own, open your mind to the possibility of getting a debt expert to give you professional advice. There are companies who are sincere in helping consumers get out of debt.
If you are looking for a place to start, you can rely on debt consolidation made easy with nationaldebtrelief.com. This company has helped thousands of consumers get out of debt. Not only that, they are a firm believer of educating consumers about financial management and the different debt relief options that are available to them. Regardless if the debt solution is not part of their financial services, you can rely on this company to educate you about it. That is what sets them apart from other debt relief companies.
This is the type of debt expert that you need to look for. While they can help you get out of debt, it is up to you to choose which of them can sincerely help you reach your financial goals.
Debt consolidation helps you take care of your credit score
Regardless of the debt consolidation option that you will choose, it is very important to take care of your credit score. This is the one thing that will help you improve your financial position.
Fortunately, being in debt gives you an opportunity to boost your score. After all, you need to display good credit behavior when you are trying to improve your credit score. You cannot do that if you do not have any debt to pay off. When you pay your dues on time, keep your credit utilization low or take extra care when handling old and new accounts, these habits will improve your credit score. But if you are irresponsible with your debt, then your credit score will end up in ruins.
If your goal includes improving your credit score, then consolidating debt will help you accomplish that. This debt solution allows you to restructure your multiple credits so it ends up being more simple. It will leave you with only one debt to monitor each month. Since paying off debt is now easier, the chances that you will miss out on payments will be lower. That is how this debt solution can help you build your credit score.
Consolidating debt goes beyond a low-interest rate
Finally, you need to get it over your head that consolidating debt is not just about getting a low-interest rate. Some people are blinded by their pursuit of a low rate and that leads them to make the wrong decisions.
There are two things that you need to remember when you are consolidating credit.
First of all, you need to solve the root cause of the debt problem. As mentioned several times in this article, this is just about restructuring your payment terms. Debt consolidation does not pay off the debt. Neither does it eliminate that cause of the debt. If it is overspending or an irresponsible behavior with the use of credit, that is not part of what debt consolidation will solve for you. These are problems that a lower interest rate cannot improve – you need to work on it yourself.
The second thing that you need to consider is the fact that getting a lower interest will not guarantee that you will save money on the loan. It can lower your monthly payments and help keep your budget from stretching too much. But the only way that you can really save money on your consolidated debt is when you shorten your payment terms. You will end up with a higher monthly payment but that will lower the overall interest that you need to pay the debt.
In case all of these seem very confusing to you, why not get the help of a debt professional? If you are not sure where to look, start with reputable review sites that can give you a glimpse of the best debt relief companies out there. You can start with on debt consolidation. This website does not only rank the best companies, they also include a thorough explanation of why and how these companies rank high.
In the end, researching debt consolidation and your different options will really help you get ahead when it comes to solving your debt situation.