Debt Consolidation Programs Help You Get Out of Debt

How can you consolidate your debts?

If you are a debtor, bogged down under the burden of debt, then it is time that you approach a debt consolidation company and take up a debt consolidation program to get you out of your dire situations. Debt is a weight that is very hard to carry around in your shoulders.

Most of the times you don’t realize the trouble you are calling upon yourself when you are overspending is incurring debts on your credit cards. This is more often when you have more than one credit card. If you have debts on all your credit cards, then it is very difficult to get out of such a situation. Your entire debt burden can be eased through the method of debt consolidation whether you do it on your own or take the help of a professional debt consolidation company. Read on to know about these methods in details.

How does a debt consolidation program work?

This program will work best for you if you’re unable to make more than your minimum monthly payments every month. The main aim of the debt consolidation company is to help you to pay back your credit card debts. For achieving this, the debt consolidation company makes you go through the following process.

1. Getting a negotiator

When you enroll for a debt consolidation program, the debt consolidation company provides you with a negotiator who also works as your personal counselor.

2. Evaluation of economic condition

The first work of the negotiator is to evaluate your financial condition very carefully. He then decides the amount of debt payments that is feasible for you to pay every month after taking into account your income, necessary expenditure, and savings.

3. Negotiation with creditors

After the previous process, the negotiator mediates with your creditors to reduce the interest rate on your outstanding debt. If this is done, then you’ll be able to pay back your debts in full. If the interest rates on your debts are reduced, then you can make lesser monthly payments each month. This is quite feasible for most debtors.

4. Collection and distribution of debt amounts

After the negotiator has successfully convinced your creditors about reducing the interest rate on your outstanding debts, you can give him the total amount of debt payments that you need to make at the beginning of every month. He then distributes this amount amongst your various creditors. In this way, you can get debt free within a predetermined amount of time.

What are the advantages of a debt consolidation program?

There are various advantages that a debt consolidation program has.

You can make payments once a month to pay back the entire debt amount of a whole month for all the creditors.

You get a reduced interest rate which helps you to make lower minimum monthly payments and also save money in the long run.

3 Ways to consolidate debts quickly

It is generally found that people often become irregular to make monthly payments on their credit card bills. Hence, they frequently fall into debts. If you’re in the same condition, then you can opt for credit card debt consolidation.

1. Enroll into a consolidation program

If you’re unable to pay off your debts with the high rate of interest, then you may enroll in a debt consolidation program. Here, at first, the company representative will analyze your financial situation and decide upon a single monthly amount, which you need to pay to the company. They will negotiate with your creditors to reduce the interest rates. Upon receiving your payment, the company will accordingly distribute it to your creditors on your behalf. With the help of this method, you can pay off your debts in full by making lower monthly payments.

2. Get a consolidation loan

Under this process, you yourself will be able to repay your debts. Here, at first, you have to take out a new loan from a financial institution. You pay off your existing creditors with the new loan and thus, replace your multiple bills with a single loan, which you have to pay by making single monthly payments.

3. Balance transfer method

A balance transfer is a debt consolidation method through which you can transfer the balance from all other credit cards to one credit card that has the lowest rate of interest. Now, you can pay all your credit card bills at a lower rate of interest. This can help you reduce your outstanding balance much faster. You can also take out a new zero or low-interest credit card with and transfer all the outstanding balance on your existing credit cards to the new one. This will help you pay off your debts faster. In this case, it is generally found that the low-interest rate period is offered for about 6-12 months. Hence, your potential savings will be added up.

Useful tips to remember while consolidating debts

If you opt for a debt consolidation program, then you should stop swapping your cards as otherwise you will dig yourself into a deeper hole.

  • Make sure you get help from a reliable and reputed consolidation company, otherwise you might be scammed.
  • If you want to take out a new loan at a lower rate of interest, then you must have a good credit score.
  • You will have to pay a fixed rate of interest on the credit consolidation loan.
  • If you miss a single monthly payment, then the credit card company may cancel your introductory rate or will raise the interest rate to the maximum allowed in your state.
  • If you close all credit card accounts except the one with the lowest rate of interest at the same time after balance transfer, then the available credit limit will suddenly lower down. This may higher your credit utilization ratio.

Final thoughts

You can do debt consolidation on your own as well. You can take out a debt consolidation loan at a lower interest rate than what you are paying for the smaller debts individually and pay back your smaller debts with this amount. You can take such loans from the bank though it will be difficult to get suitably low rates if you are already deep in debt.

The best option would be to take out a secured loan by keeping any asset that you own as collateral. Usually, your home or property acts as the best collateral. However, you can keep stocks, bonds, jewelry, and so on as collateral. You get a lower interest on secured on as compared to any unsecured loan as there is the guarantee of the asset even if you fail to make the loan payment. With the lower interest rate your monthly payment decreases and you have to make single monthly payments as now there is just one loan to pay back. Thus, you can see how beneficial debt consolidation is to help you pay back your debts with ease.

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