Consolidating Your Debts

Do you have a lot of unpaid bills and are having trouble making the minimum payment every month?
Are the debt collectors hounding you mercilessly?
Are you receiving letters from the collection agencies daily?
A debt consolidation loan may work for you.
On way to get a debt consolidation loan is to tap into your home equity if at all possible, for  those who have the equity available.
This may be a solution for those who have run up a lot of credit card debt.
This will not add to your debts but re-financing your home and taking out an equity loan can be a solution for some if you  have the equity available and can diligently put away those credit cards that got you into the debt predicament in the first place.
This frees up your credit cards as the balance is moved from them to the other loan, but it is all too easy to rack them up again.
This generally only work for those who are really committed to consolidating their debts and have worked out a stringent budget to ensure that they do not fall into the same trap.
The benefits are reduced monthly payments which do give you some breathing room but can also lull you into a false sense of security.

Dealing with Debt Consolidation Companies

If you are feeling the pressure of mounting debts and are looking for a debt consolidation company or a debt negotiator there are a few pitfalls to be aware of as you explore this option.
Some companies charge hefty upfront fees, others can charge fess based on the amount you owe, or the amount of overdue accounts and credit cards that you have. A few will also charge a fee dependent on the amount of debt that they can get the card company to settle for.
All in all it's still a scary situation.
Your credit rating can also take a super hard hit if going through a debt consolidation company.
Often the company will tell you to stop making payment to your creditors and make the payment to them instead.
However it may take them months to negotiate a settlement  with all your creditors and in the meantime you have not been making even the minimum monthly payment impacting your credit report negatively, and the debt consolidation company  has your money in an account  and it is not going directly to all of your creditors.
The goal is to get out of debt,  rather than to totally ruin your
credit rating if possible.
Another pitfall that can happen is that if your creditors refuse the settlement amount from the debt consolidation company you can be sued.
Then not only are your our fee for the debt consolidation but your are still obliged to pay back the original amount of the loans.
While this is a rather rare scenario it does happen.
Investigate all companies diligently before signing anything at all.

If you only have a few thousand in debt a better solution may be to use
a debt management program.
They way they typically work is that you write a check to the debt management agency and they in turn issue check to all your creditors.
One of the small side benefits of this is that some credit card companies will lower your interest rate on your debt and quit charging late fees in they see you are earnest in paying off your debts.
The average debt management program lasts 2 to 5 years depending on the full amount of the debt and repayment terms.
Be sure to do your homework and investigate any company before dealing with them.
If possible get in writing all fees charged, how much they charge, and EXACTLY what they are charging for.
Debt consolidation is a viable alternative but due diligence must be done to make sure that you do not fall prey to unscrupulous companies.

Copyright 2003

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