DEBT CONSOLIDATION
You heard a debt consolidation company promising to provide debt relief with just one easy payment so they will start dealing with your creditors on your behalf. They promise to negotiate for lower interest rates and smaller mortgage payments. Does this sound too good to be true? It probably is.
Always Be Aware Of The Fees That Debt Consolidators Charge: The majority of debt consolidation lenders charge an upfront fee for setting up your loan. There could also be a fee charged on your monthly payment they make to your creditor. It usually amounts to 10% of your monthly payment. Always ask about the fees that a debt consolidation program charges.
Follow Up With Your Creditors To Make Sure They Are Being Paid: Debt consolidation companies are known to miss payments to your creditors. In some cases, debt consolidators could go bankrupt and take your money with them. Either way, it could leave you with a negative report and higher bills.
All things considered, is it really worth it to pay someone to renegotiate your loans? Most creditors will be accommodating if you are willing to pay back your debt, allowing you to negotiate better terms.
What Else Can You Do?
In most cases, people got in to debt because they spent more than they made. The obvious solution is to spend less than you make. To get help, there are non-profit, community organizations that provide free and confidential debt management advice. One such organization is the National Foundation for Credit Counseling which have branches all over the United States.
Tapping In To Your Home Equity: If you are the owner of your home and have equity, there could be some low cost debt consolidation loan solutions available to you.
Home Equity Loan or Home Equity Line of Credit (HELOC): These loans carry lower interest rate charges and the interest paid could be tax deductible. A home equity loan is a loan that is taken out once and has a set term with fixed monthly payments. The monthly payment of a HELOC depends on the interest rate of the previous month and the current principal outstanding drawn from the line of credit.
Mortgage Refinancing, Cash Out: You refinance your home with a new mortgage with a bigger amount than the original mortgage. You are taking cash out of your home equity. The advantage with this mortgage loan is your interest charges are relatively low. However, the term of the mortgage will be longer than the original one. It will take longer to pay off the new mortgage |
