3 Tips When You Are Considering Debt Consolidation

Posted on: 6 February 2018

When you are drowning in debt, consolidating your debt might make it easier to pay all your creditors at a lower rate than paying them individually. Before you make the decision to consolidate your debt, you need to make sure it is the best decision for your situation.

Speak With A Lawyer

It is important to speak with a debt consolidation attorney service about your current situation and not deal with creditors on your own, which could make the situation worse. For example, if you made an agreement with your creditors to pay a specific amount each month or a lump sum and falter on your payments, they may not offer you a second chance. Additionally, if the original debt is old, your debt may have been bought and sold by numerous companies, making it impossible to know whether the amount you owe is accurate. Debt consolidation can be the right choice for some people, but it is not the only option or it might not work for your situation.

Look for lawyers who offer a free consultation so you can have an opportunity to discuss your current debt problem and some basic options that might be applicable. Of course, it will cost money to hire a lawyer, which can be off-putting if you are struggling with debt, but substantial debt is often difficult to handle alone. Furthermore, if you have a lawyer in your corner, it can help if companies file judgments against you and you need legal representation in the future. A lawyer can also help you make the determination whether debt consolidation or filing for bankruptcy is the better option. Many people avoid bankruptcy, but in some situations, it is the better option than spending decades attempting to pay debt that is always increasing because of high interest rates.

Consider A Personal Loan

Depending on the amount of debt you have accumulated and your credit, you might be able to take out a personal loan, which is a better option that consulting a debt consolidation company. Although taking out a loan might sound counterproductive, the goal is to use your loan proceeds to pay off your outstanding debts. Only try this option if you are certain you can receive a loan from a reputable institution, such as a bank, and the payments will be reasonable. Ideally, the monthly payment on the loan should be lower than what you are currently paying for your debts each month. Otherwise, you will find yourself facing new problems.

If securing a personal loan is possible, do not offer your creditors any money upfront. Try to negotiate directly with them and if they make an offer, be sure they send the offer in writing. When they send the information in writing, it should include a payment stub, which is what you will use to return a check or money order in that amount. Make sure you keep copies of all the correspondence and what you paid just in case the creditor makes claims that the debt is unsettled. Systematically go through each debt and negotiate as much as you can until you have used your loan to pay all outstanding debts.

Work On The Most Expensive Debt

If you are attempting to consolidate your debt, such as by taking out a personal loan, make sure you work on each debt from the highest outstanding amount to the lowest. Settling these debts will likely have the best impact on your credit score and if you cannot consolidate the remaining debt, it is much easier to pay off smaller amounts than larger ones, especially since you need to make payments on your loan. If you have several small debts, you should organize them based on their interest rate. You want to pay the ones with the highest interest rate first, since the amount you owe on these debts will increase much quicker.

Sometimes debt consolidation can allow you to pay debts faster and finally achieve financial freedom. By consulting a professional first, you can be more confident that you are on the right path.