The Steps on the Road to a Debt Consolidation Program
In the present climate of easy credit it is easy to get in over your head with credit card debt. Many people do not realize how many Americans are living payday to payday getting deeper and deeper into the drowning pool of high interest revolving debt. With recent laws mandating higher minimum monthly payments and stricter bankruptcy laws there are those who may feel they have no options. A program consolidate debt may be the answer for these people. If you are one of those who is struggling with a staggering load of debt you may want to think about a program such as this.
There are two steps which will start you on the road to a debt consolidation program. First, gather all of your bills and make a list of the monthly payments you are making and the interest rates you are being charged. Second, access your credit report online. If you have not received a credit report during this calendar year you are entitled by law to a free report from each of the three credit reporting agencies. Your credit report will tell you how many times your payments have been late or missed. It will also give you contact information for all of the companies to whom you are making payments if you do not already have it. Combine the research from your bills and from your credit report to ascertain exactly how much you pay monthly, how much you owe and what your payment record is.
When you obtain your credit report, you should also purchase your credit (FICO) score which should be available from the same sources for a nominal fee.
Armed with this information contact several debt consolidation programs. Sources for such programs can be your banking institution, the yellow pages, the Internet, the Better Business Bureau and The Chamber of Commerce. If you know others who have had similar problems you might ask them for personal recommendations. Churches may also be a valuable resource for debt consolidation programs. Some religious organizations even operate such facilities.
Even though debt consolidation programs advertise themselves as services they are also money making concerns. Therefore, when deciding upon the one to use you should be wary of them as you would be when making any financial commitment. The purpose behind a debt consolidation program is to have the company deal with your creditors. Negotiating a reduction in your credit card interest rates, asking for reduced fees and longer repayment plans and other debt restructuring is a tedious process. It often requires a lot of cross mailings and telephone calls. Once you are in a debt consolidation program the company will take care of these matters for you. In order for the program to be successful overall you must make sure you choose a company that will deal fairly and competently with both you and your creditors.
Interview the prospective debt consolidation program representatives just as you would an applicant for a job. These people will, after all, be working on your behalf. Make sure the tasks they will do for you and what they hope to accomplish are clearly defined. It is also imperative to have a written breakdown of the fees they charge. Ask them to give you a breakdown of how much of the payment you make to them will go to the credit card companies and how much they will keep as the cost of your participation in the program. Once they have negotiated the reconfiguration of your debts with the various credit card companies the debt consolidation program should furnish you with a copy of the negotiation results. It should stipulate how long it will take for all of your debts to be paid in full.
Many programs may require that you relinquish most if not all of your charge cards. This step may be hardest of all for you to complete but it is one of the most important. Once you have gotten out from under your credit card debt and curbed your dependence on future charging your debt consolidation program will be truly successful.
How to Eliminate Your Debt
Debt is a burden many people are currently facing, and it’s neither desirable nor pleasant to be in such a predicament. Fortunately, there are realistic and achievable solutions to help individuals eliminate their debt. If you’re finding it more and more difficult to pay your monthly bills and you’re bouncing checks or borrowing from one credit card to pay another, it’s time to take a serious look at these solutions.
• Consumer Credit Counseling – Perhaps you’ve heard of, or even considered consumer credit counseling in order to get your finances under control. Consumer credit counseling agencies are usually classified as “non-profit” firms, and assist debtors in planning budgets to repay their debts. A major criticism of consumer credit counseling agencies is that each office is primarily funded by voluntary donations from the creditors that receive payments from debtors repaying their debts through that office. Obviously, this leaves the average consumer left to wonder whether or not the agency they’ve chosen is actually working for them or their creditors. Nonetheless, consumer credit counseling may be a safe route for you if you can realistically commit to a long term re-payment schedule. If you should decide you’d like to enroll in a consumer credit counseling program, it’s best to choose an agency about which you’ve heard good reviews. Don’t be afraid to ask friends and family if they may be able to refer you – you’ll be surprised by how many people have found themselves in this same predicament.
• Debt Consolidation – Debt consolidation involves obtaining a loan to combine several loans and credit card debts into one loan. Put another way, debt consolidation is the process of taking out a new loan to pay off a number of other debts. Most people who consolidate their debt are usually doing so to attain a lower interest rate, or the simplicity of a single loan. This is a common solution for individuals with credit problems (maxed-out credit cards, car loans, student loans, etc.), who combine all their debts into one loan to create greater ease in repayment. In the case of credit card debt, this can often be advantageous since credit cards generally carry a high interest rate. Normally people seeking to consolidate their debt are required to have a sufficient amount of equity in their homes, which is used as collateral. Be very cautious when considering this option, as 85% of individuals who have gone this route have once again maxed out their credit cards within 24 months of obtaining a debt consolidation loan, and now owe twice as much money as they did prior to consolidating their debt. Still, debt consolidation can be very helpful to individuals who can follow through with their commitment to continuously make their monthly loan payments, and have demonstrated enough self control to not use credit cards for frivolous purchases.
• Debt Settlement – Debt settlement (debt negotiation) is a practice which involves negotiating with your creditors and ultimately reaching a mutually agreeable settlement, which is typically 50% or less of the total amount of debt you owe. In other words, if you owe a creditor $10,000, you may be able to reach a settlement in the amount of $3,000 - $5,000, with no further balance owed to that particular creditor. Many creditors will agree to accept the agreed upon settlement amount over a period of 3-12 installments if sufficient funds aren’t available for a lump sum payment. In order to qualify for debt settlement, your accounts must be delinquent, and of course you must be able to forward the settlement funds to your creditor prior to the deadline, otherwise the settlement agreement will become null and void. Debt settlement is a good option for people who simply can no longer afford their monthly payments, and prefer to eliminate their debt within 3-24 months. To learn more about debt settlement, click here.
• Bankruptcy – As you may know, bankruptcy is really the “last resort” for most people. This is due to the fact that individuals who file bankruptcy are faced with the bankruptcy filing being made a matter of public record, as well as a negative credit rating for a period of 7-10 years. However, some people have no choice and must simply file for bankruptcy. If your bills are unmanageable and it’s impossible for you to commit to a long term payment arrangement, or even obtain sufficient funds for debt settlement, this may be your only option. That’s okay, too – the bankruptcy law was originated for a reason; if you need it, use it. Fortunately, there are many attorneys who will offer you a free initial consultation to help you determine if this is your best path.
I highly recommend that you consider all of your options, and approach each of those with an open mind. What matters most is that you successfully eliminate your debt, and start living again.