Managing several debts with different principals and interest rates every month can make it hard to make ends meet.
If that is your problem and you badly need a way out, then debt consolidation may be the answer! With debt consolidation you can combine your existing debts into a single payment at a lower fixed interest rate.
This is by far the easiest and cheapest option to getting your debts consolidated. All you need to do is take out a low interest loan and use it to pay off your existing liabilities. As you pay off your obligations, you are left with a single monthly payment to be made on the consolidation loan. The low interest rate makes your repayment affordable.Types of consolidation loans
You can take out either a secured or an unsecured loan and use the proceeds to consolidate your existing loans.
A secured loan is taken out with an asset that is used as collateral for the loan, while an unsecured loan does not require any collateral.
Ideally you should choose a consolidation loan with a low interest rate, so you lighten your debt load. Using a collateralized secured loan will decrease your interest and increase the amount of principal you are able to borrow. So, secured loans are more advantageous for debt consolidation. Home Equity Lines of credit/ Home Equity Loans and loans borrowed against assets like cars and jewelry, are some of the best secured loans that can be used for debt consolidation.
Low interest unsecured personal loans can also be used for debt consolidation!
If the idea of a consolidation loan does not sound feasible, then the best way to get your debt consolidated is with a reputable Better Business Bureau (BBB) accredited debt consolidation company in North Carolina.
Before you enroll, the debt consolidation company will analyze your finances and help you decide which debt solution program is right for you. Once you enroll, you will need to pay a small upfront fee before the company will pass your case over to one of their debt consolidation attorneys.
The attorney will then send a "cease and desist" letter to your creditors and begin negotiating to lower your interest rates, penalties, charges, and get you a better repayment plan.
The plan will require you to make a single monthly payment to the company. The company will then use this money to pay the monthly installments to your creditors and pay its monthly charges.
Debt consolidation hurts your credit score less than debt settlement or bankruptcy because with debt consolidation you repay the entire amount of your debts.
When you take out a loan to consolidate your debts, your credit score initially goes down, but as you start paying off your accounts, your credit scores increase. Then as you pay off your consolidation loan your credit score increases even more.
Simply enrolling in a consolidation program is not enough. You need to take some steps to make sure your credit score does not decrease even more.
Here are certain things that you should keep in mind when you are in a debt consolidation program, so that your credit score is not risked: