To Consolidate of Not To Consolidate? Make an Informed Choice Through Debt Consolidation Counseling
If you are facing a lot of debts, debt consolidation might be a tempting solution to consider. This is to put all your debts together in one creditor which is usually a bank so that you will only face one instead of many. This has the advantage of paying less in interest rate and of course, the reduced confusion which results from facing only one creditor. Now this may not be the best solution in your case and that is why, we have debt consolidation counseling. The purpose of this is to give you a good perspective and hopefully improve your control over your finances and prevent you from falling into another pitfall. Here are some things that you need to know:
1. Credit counseling
If you are having a hard time making sense of your finances, it is not a bad idea to seek the help of credit counselors. There are companies that specialize in this and there are also a lot of non-profit organizations that are willing to help you get out of your situation. These people, being experts in this kind of situations will look at your financial situation and give you options that you can choose from. These options may include debt consolidation, self-help plans, debt management plans or even bankruptcy. Through their help, you can then decide if debt consolidation is the best option for you.
2. Debt consolidation
One of the many options that your counselor will give you is debt consolidation. This involves gathering together all your debts into one loan so that you will just pay one debt at a low interest rate. Now as long as you have high credit scores, there are a lot of companies that are offering really low interest rates in order to encourage you to consolidate your debts. In order to make the most of these deals, you should take a look at your present interest rates and compare it with the loan that you are qualified to get.
Just some words of warning though, if you have problems with budgeting or if you have the tendency to overspend, any debt relief program you sign up with will be useless if you cannot curb your bad spending habits. Remember that debt consolidation is merely transferring your debt from many creditors to one lender, but your debt is still there piled in one heap. So do not assume that you can go back on your old ways of using your credit cards during sale season or splurge in the non essentials if you are still up to your neck in financial obligation. Your debt counsellors often will help borrowers plan a budget to help them pay of their debts over time.
Debt Consolidation Counseling-How to Consolidate Credit Card Debt
If you are overwhelmed with credit card debts, then maybe you are a good candidate for credit card debt consolidation. The same principle applies here. There are also credit card companies that offer to consolidate all your credit card debts into one card hence, decreasing the number of creditors that you have to face.
As a credit card holder, there are many options available for you in order to consolidate your credit card debts. You can get those zero or low interest balance transfer deals and move those debts to a single card or if you are a home owner who has equity on your home, you can avail of a low-interest home equity loan to consolidate your credit card debts. The two options have their respective pitfalls. Watch out for those zero or low interest rates when transferring your credit card balances as these rates are often just initial offering to attract new borrowers. However, they will most likely increase in a few months’ time so you better know when the special rates becomes void and make sure that you can pay the full amount by the time the rate shoots up. If not, you may need to refinance again.
As for home loan equity, the greatest danger here is putting your own home on the line. Before obtaining such kind of debt consolidation, make sure that you can easily afford the monthly payments since defaulting could mean losing the roof over your head.