If you allow your debts to pile up, they can draw you into a vicious debt cycle. You can try to solve the debt problems on your own by implementing some severe austerity measures such as cutting spending to the bone, and selling luxury items to free up cash. You can also look at getting assistance from a debt relief company or opt for refinancing.
If you have managed to get your existing mortgage refinanced, now is the best time to pay off debts, either by using the freed-up cash you received from your refinancing, or via your new lower monthly payments.
If not, and you qualify for other debt relief options, you can always try debt consolidation to pay off debts. Debt consolidation is a process in which you merge all your debts into a single account.
You can consolidate your debts via a debt consolidation loan, or with the help of a debt consolidation program.
Debt consolidation can be done with the help of a debt consolidation company or you can approach the creditors on your own. Sometimes it may be better to wrap up your debts with the help of a debt consolidation company because availing another loan only adds to your existing debt burden.
If you have a reputable debt help company to represent you, they are familiar with the way creditors and collection agencies work. A debt consolidation company negotiates with creditors so that the current interest rate can be reduced, thereby lowering your monthly payments. With a new repayment schedule you are then able to pay off debts more easily.
Debt Consolidation Program Benefits
- You get a new monthly repayment plan
- You enjoy reduced interest rates on your debt
- Since the interest rate on your debt is reduced, the amount you have to shell out each month is reduced considerably
- You stop receiving calls from your creditors or your collection agencies
- As your debts are paid off, your credit score will improve
Debt Consolidation Program Drawbacks
- Administrative charges used to pay for a debt consolidation plan at the entry level can often be better utilized for directly paying off debt
- Thorough research is required to separate predatory non-profit debt counseling companies from legitimate ones
- It’s nearly impossible to get new credit while on such a program
- All debts may not qualify for a debt consolidation program
Whatever your situation, it’s important to understand that it is always better to take a proactive solution by changing your spending habits to minimize debt. So why not start right now?
Photo Credit: investmentzen
It’s great whenever i stumble on a excellent blog post like yours, Len. Continue the good work. There is lots of good stuff here and I subscribed as an Insider now.
Thank you, Jacqulyn!
There are few times when this might be acceptable, but in the process of helping a friend who was desperate to get a consolidation in order to put the credit nightmare behind, I agreed to pay off her consolidation for a couple percentage rates less that the consolidators were charging. She was fortunate in that she was able to pay off the company fully without penalty and then paid me faithfully on a monthly basis for two years. I earned more than the same money could have in practically any investment and she had a lower monthly payment than under the consolidation company agreement. Sometimes the sincerity of a person is properly judged and allows these things to happen.
I continue to enjoy your work Len. Keep at it.