Are you troubled with too many monthly payments? Are your payments devouring a huge portion of your income? If this is your situation, then you should consider consolidating debt and get your debts simplified.
With this program, you can replace your multiple debts with a low-interest single monthly payment and get all your penalties eliminated.
Steps to get your debts simplified through consolidation:
- Go for credit counseling: Get in touch with a reputable company (preferably with BBB accreditation) and consult the credit counselor about your debt situation. The counselor will thoroughly analyze your financial condition in order to figure out how you should proceed with your consolidation program.
- Sign up for counseling: Once you are done with the counseling session and convinced that the debt consolidation program is right for you, you will need to sign up for the program.
- Lawyer will contact your creditors: After you sign up, the attorney sends "cease and desist" letter to your creditors to stop contacting you. The attorney also notifies the creditors that your debt issues will be handled by the company from now on.
- Arbitrator will initiate negotiation: The company's debt arbitrator will negotiate with your creditors to lower your interest rates and eliminate your penalties, so that most of your money goes toward the principal and not other charges. Then, the arbitrator will fix the amount you will pay each month with your creditors
- Your payment plan: The debt arbitrator will devise a payment plan within your budget. The plan will require you to pay an amount each month to the company. The company will then use that money to distribute the monthly payments to your creditors under the agreement that was negotiated. Thus, your multiple payments get replaced with a single payment, thereby simplifying your debts. On receiving the payments, the creditors are will to send you a receipt confirming that they have received the payment.
Tips to choose the right debt consolidation program
Now that you know how to simplify your multiple debts, the next step is to ensure that you choose the right program.
In the beginning, you should make a list of the reputable companies in your city that offer to consolidate your debt. Then, gather the following details about each company on your list:
- How long has the company been providing debt relief services? Choose a company that has a good record of successful completion of the process.
- How is the company's reputation? Check with the FTC, Better Business Bureau, and other pro-consumer groups about the company's reputation. Find out if there are consumer complaints lodged against the company. You can google the company's name and find out information about the company and its reputation from online forums and other online discussion groups.
- Does the company have a BBB accreditation? It is advisable that you choose a company with Better Bureau accreditation.
- Is the company licensed to practice in your state? Do not enroll with a company that is not licensed to practice in your state.
- Is the company giving you a transparent fee-structure? Check the company's fee-structure. Also check if there are any hidden costs that might be charged later. Always enroll with a company that provides you with a transparent fee-structure. Avoid a company that asks for an exorbitant upfront fee.
- Is the company providing you with relevant information? Ask for the company's past records, testimonials, and other relevant information. If the company is reluctant to provide this information, then you should stay away from that company.
Compare the companies on the list on the basis of the details that you have acquired, and hire services from the company that seems most credible to you.
Some points to remember
Debt consolidation is a great way to rid yourself of your multiple debts. It makes your life easier when many debts get combined into a single payment.
However, you should avoid certain things, when you are in a program, so that you do not end up injuring your credit score any further.
Here are the things you should remember:
- Do not close your credit card accounts soon after you have paid them off, as it impacts your credit score negatively.
- Avoid taking out any new loans, while in a consolidation program, as it can lower your score.
- Make timely payments. Timely payments improve your credit score.
- Avoid balance-transfers, especially when you apply for a new credit card in order to use its low teaser rate. If you fail to pay off the debt within the trial period, your interest rates will increase, and that can hurt your credit score.
- Avoid frequent applications for credit, while in a consolidation plan. Applying for new credit every six months will open up possibilities for new defaults.
So, if you are frantically looking for a solution to your multiple debt problem, considering debt consolidation could be the best way to fix your problem fast.