Attack Your Household Debt

Attack...with Debt ConsolidationIf you’re dreading every phone call that your phone receives because of those nasty creditors, it’s time to start evaluating your finances and looking at ways to get yourself out of debt. What’s worse: skimping on things to eventually get free of those phone calls, or a poor credit rating that ends in bankruptcy with phone calls almost daily?

Risks of Debt Consolidation

Before you look at your options, it’s important to understand some of the risks involved so that you can avoid them. More than anything else, debt consolidation will require you to completely change your lifestyle, including where and how you spend your money.

Avoid defaulting on payments further as it will only slide you further into debt. Hidden fees on debt consolidation loans are big contributors to increased debt. Be sure that you carefully review any contracts you’re signing, and that you understand what you are paying in fees and how that money affects or benefits you.

Types of Debt Consolidation

Debt consolidation is not restricted to a singular process; there are advantages to working with creditors in different ways. You can choose to negotiate with creditors on a one to one basis, which is actually useful for individuals with a moderate amount of debt. Fewer than five creditors is a lot easier to manage than owing 5 or more companies money.

One important option is a debt consolidation relief program, which allows you to take all of those scattered debts and pay one principal instead of several. Often, these loans come with a manageable payment that you can use to gradually reduce the money you owe.

Balance transfer cards also give you some space to pay off your existing balance, often at 0% interest. These cards give breathing room for consumers, usually spanning anywhere from 6 to 18 months. Once the terms are up, you usually qualify for a much lower interest rate on your remaining balance. Just don’t pay the minimum and you’ll most likely save thousands in interest with a 0% balance card.

Seeking the help of a credit counseling firm is a bit like debt consolidation. You often work with one company instead of several, and they negotiate the costs of your debts for you. They may also help establish a budget for you and your family while you focus on getting your life back on track.

Due Dilligence

Credibility is extremely important when you are reviewing options to rid yourself of debt. Scams are not as prevalent as they used to be in the early 2000’s, but you should still be on the lookout for certain red flags.

Promises that seem too good to be true often are. The FTC recently brought a $10 million judgement against a creditor for promising that he could dispute and remove bankruptcies from a person’s credit report even if those bankruptcies were accurately reported.

Firms that charge you upfront may not be looking out for your best interest. Think about what stake they have for you to get a lower credit rating if you have already paid them. Sure, they might make more on a successful judgment, but good marketing leads a million customers to them so they stand to make more by devoting less time to your case. That’s why you should be paying based on the debt settlements that are negotiated for you.

If you’re considering debt consolidation, the Better Business Bureau is a good website that you can use to check and see if the company you want to work with is actually reputable. You’ll be able to review consumer complaints and comparison shop with a lot more information on your side.

 

Image credit: Riccardoce

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