Debt consolidation isn't for all. However, if you're one of those lucky few who'd benefit from having your all or parts of your outstanding loan balances unified into one, then you should find out more about consolidating debt.
The first step toward vanquishing your debts, is to ask yourself - Do I need to consolidate my debts?
Debt relief companies put up too good to be true advertisements, promising guaranteed solution to financial distress. Keeping that view in mind, you could decide to have your debts rolled into one easy payment or get a new loan larger loan to pay off other revolving ones.
It's important you assess your financial health before consolidating your debts. Once you've gained a deep insight of your finances, you can decide for the most suitable debt relief program.
One of the major pitfalls of debt consolidation is having a mirage sense of debt reduction. Reduced, unified monthly payments may create a false notion that you've regained authority over your finances. But the opposite could be true, as you might be rolling over high interest credit card bills every month and thus, paying more than what you actually had bargained for.
You'll have to keep the urge of falling back on your old spending habits in check and stop accumulating fresh debts altogether. If you can't control your urge of adding more balances to your accounts, then you may land into bigger troubles than before.
The key to debt relief is to practice self-discipline. Debt consolidation will be a good idea, only if you're willing to stick to a budget. By the virtue of effective financial planning, you'll be able to resolve your debt problems and even raise a sizeable amount of savings in the future.
When consolidating your debts, make sure you've assessed the cost of it. For instance, if you're taking out a home equity loan, then find out what the closing costs would be and what are the points that you'll have to comply with.
Similarly, if you're transferring your cards' balances to another card, then what are the charges that you'll have to pay for. Make sure you're aware of the deadline to make the payments. Sometimes, there are caps beyond which an introductory rate might be re-adjusted once its tenure has expired. All these factors and more should be considered before you take the final plunge.
The bottomline is if the interest rates and other costs levied on your loans aren't reduced significantly after consolidating them, then all your efforts to get out of debt will be an eye-wash.
Balance transfer - Credit card companies will increase interest rates, if you fail to pay off the balances on time and allow it to stack up. To deal with it, you can transfer your high-interest balances to a less charging credit card.
Still, be wary of exceptionally low introductory interest rates.
The reason is many credit cards don't offer low interest rates for an extended period, rather, their rates skyrocket once the promotional offer is over. However, you can try out using one of these cards, if you plan to pay off your debts within the promotional period.
On the other hand, you may look to other debt relief vehicles, if paying off the debts within the stipulated time frame doesn't seem likely. Stay away from cards that come with higher rates than your present credit cards' which you're now paying, after the introductory rates have expired.
Unsecured loan - A better debt repayment vehicle might be to obtain an unsecured loan through banks. Such loans don't require any collateral, hence, are called unsecured loans. If you're eligible, then you could do well with a low-interest loan as compared to your present ones, and use the loan money to pay off your other debts at once. But the challenge remains in qualifying for them, as you'd need to show a stable creditworthiness to take out an affordable loan from the banks.
Secured loan - Another useful alternative could be a home equity loan (a kind of secured loan in which you use your home as the collateral) that can help you pay off your debts. A home equity loan can be qualified for quite easily. The interests paid therein are tax deductible and the rates charged are somewhat cheaper than other lines of credit. However, consider it as a last resort since using a secured loan (mortgage) to pay off unsecured debts (credit cards) is a high risk job. You could lose your home in a foreclosure, if fail to pay back your home equity loan.
Apart from that, a consolidation loan taken from a reputed financial institution can come to your rescue, if you aren't a homeowner and are likely to be turned down for fresh credit by the lenders. But your consolidation debt could be costlier than your credit card debts. As a result, you may have to pay higher loan origination fees, interests and other expenses. Still, it'd be advantageous, as you'd be making single monthly payments over a definite term.
Debt consolidation is also referred to as ‘one easy monthly payment' mode of getting relief from insurmountable financial obligations. Here, easy monthly payment implies that your monthly debt repayment amount would be lower and more affordable to you. However, it doesn't mean that you are paying less than the total debt owed. Rather, your debts will be repaid over an extended period of time, depending on your financial health. You could get rid of your financial obligations faster, if you can make larger payments and thereby, reduce the total interest paid on the loans.
Consolidating debts can bring in good fortune for you or leave your financial health in ruins, depending on the manner used. To prevent another financial disaster, here are 3 questions you should ask before consolidating your debts:
There are several debt relief vehicles and debt consolidation is just one of them. You can't consider having your debts consolidated as the only way to resolve your financial problems.
The fact is if you fail to keep your spending habits under check, then taking out a consolidation loan may backfire, as you may get trapped deeper into debt.
Get a deep insight about the interest rates you are paying on your debts. Credit cards, like other high interest loans, are the ones that are mostly considered for consolidation. However, it isn't a good idea to consolidate low-interest debts like student loans.
You need to have a good understanding of the risks and advantages of all the debt relief vehicles, before opting for any one. If needed, contact a seasoned debt professional to help you arrive at the most suitable decision to deal with your debt crisis effectively.
Once you have made the final decision, choose a debt relief company that is licensed to operate in Oregon. Otherwise, you may get scammed. Check the license/registration number of the debt relief company you want to work with. For instance, OVLG's debt management registration number in Oregon is DM 80103. This number confirms that they are not a fake company.
The statute of limitations (SOL) is a legal provision wherein a maximum time period has been set for certain events, expiry of which may lead to legal proceedings accordingly. The SOL for debt obligations are applied to the maximum period once a consumer has become delinquent on their loan repayments.
A consumer is said to be delinquent from the date when he/she has missed the payment deadline and not from the last date of his/her payment.
For example, if you've made your last debt payment on 05/05/2016 and your payment was due on 05/06/2016, then the SOL on your debt will start from 06/06/2016 onwards.
The period of SOL varies from one state to another. It mainly depends on the kind of debt and the place of its origination. Hence, if you've taken out a loan in New York but live in Oregon, then the SOL of New York will be invoked.
Oral Agreements: 6 Years
Written Contracts: 6 Years
Promissory Notes: 6 Years
Open Accounts (credit cards): 6 Years
(This section is for reference only and must not be considered as a legal advice for the Oregon consumers. You may work with a private attorney whenever necessary.)
Oregon Fair Debt Collection Practices Act (FDCPA) is followed in Oregon, according to which:
In a separate move, the Oregon Department of Justice, has ordained that a collection agency may charge not more than 9% interest on the loans.
It also offers the Oregon Wage Protection. Under this law, an Oregoner's 75% weekly disposable income (after tax earnings) or $170 a week, or whichever is greater, is out of reach for the debt collectors to impound.
In case of violation of Oregon debt laws by the creditors or debt collectors, you can contact the “State of Oregon Department of Justice” by filling up the “Consumer Complaint Form”.
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The fees provided in this Fee Disclosure are based upon the fees guideline provided by the Oregon Division of Finance and Corporate Securities (ORS 697.692).
Client agrees that he/she is responsible for paying OVLG’s fees as mentioned in this fee disclosure. OVLG will withdraw fees for the services provided from the client account only with the client’s specific authorization as mentioned in the written payment authorization signed by the client.