Managing overwhelming debt is just a more common problem than most people think. Unfortunately, people coping with large levels of debt are often unaware of most of the options they have or, worse, consider all debt solutions (from debt settlement to debt management to bankruptcy to debt consolidation) as pretty much the same thing. They're not. Debt consolidation is a totally different method of debt than all other methods. Debt consolidation is not right for all and not anyone can qualify for it. But for the proper people in the best situations, debt consolidation could be definitely the most effective way of getting out from under large levels of debt ... without hurting your credit!
Unlike bankruptcy, you may not have to get a judge involved and file legal paperwork to consolidate debt. Unlike debt management, you may not desire a counselor or agent to do something on your own behalf. And unlike most plans of debt relief, debt consolidation done correctly won't hurt your credit score or your financial reputation. Obviously, debt consolidation is not for everyone. Financial woes have a means of being unique, and each person or family facing mounting debts has plenty of special factors which come into play. Financial plans designed to help people cope with debt cannot be considered as one-size-fits-all. Besides that, not everybody (even those who want and need it) can qualify for debt consolidation. Simply, debt consolidation is just a means of rolling many debts together, taking out another loan to cover them off, and then managing the consolidated debt. In other words, you take out a large loan, use it to pay off all of your charge cards and other debts, and then pay off the big loan. This sounds counter-intuitive. For anyone already saddled with debt, the thought of adding another debt is probably terrifying! And just how can adding an additional colossal debt to the mixture allow you to? The clear answer is not that you're simply getting another loan, this really is a means of re-organizing or re-structuring your debts. For example, let's say you've seven credit cards. You're maxed on three and you borrowed from differing amounts on one other four. Altogether, you owe $82,000 on credit cards. Now let's say that there is $22,000 in car notes and another $4,000 on a revolving plan from the furniture store and the sum total debt adds around $104,000. That may sound high to some people, but it's really not all that unusual! Now consider the interest rates on those loans. This can take some detective work, but that information should be available in your monthly statements. If it is not or you can't believe it is (or determine what they're talking about), call the toll-free customer service number most such companies have and discuss the loan with them. You want to know the interest rate, that will be the percentage of the total loan the company charges you for the privilege of borrowing its money. You will most likely find that interest rates are all around the map. Department store charge cards are traditionally pretty high (22% is not unheard of). Other charge cards span a pretty broad range (16% to 20% is rather normal). An in-store loan for furniture is likely high (22% is typical) but the automobile note could be half that (10% to 12%...again, these vary widely). When you yourself have debt, you are paying not just the actual amount you borrowed, you're also paying interest. Interest may be the dirty little secret of debt since it keeps accruing, day after day after day. The longer you decide to try pay your loan, the more interest you'll pay. In reality, invest the good enough to pay off a high-interest loan, you are able to wind up paying more in interest compared to the loan itself!! Think of sales tax. Here in Texas, where I live, we pay 8.25%. That seems high to me, and most of my fellow Texans will agree. But many interest rates on credit cards is double that-over 16%. Imagine paying double sales tax! That's how interest can actually add up. Coming back to the example, your debt $104,000 at a variety of interest rates. What if you can get a loan for $104,000 at, say, 12%. Would that produce sense? You now swap out your many smaller loans for just one giant loan at a reduced interest rate. But let's go through the car note. If you're paying 12% or less interest on that, it wouldn't sound right to cover it off and then remove a new loan at exactly the same or higher interest! Can you actually find lower interest rates? A lot depends how low you will need to go, how good your credit is, and a number of other factors. A big plus in debt consolidation is home ownership. If you have your personal home, perhaps you are able to get a home equity loan or refinance the Debt Management Texas mortgage in such a way as you are able to extract money from your home to pay off your debts. A mortgage company, banker, or debt consolidation professional can allow you to find out if that works. If you don't own your own home, do not give up. Debt consolidation can always be possible using a type of credit (a form of unsecured loan obtained through a bank, credit union, or financial institution). You may also manage to borrow money using something different of value (a 401(k) account, stock account, property) as collateral. Any time you have collateral, it's easier to obtain a loan and you'll likely have more clout in getting lower interest rates. That's because collateral means lower risk to the lender. If you place up your retirement account as collateral for a loan, the lender has the right to take funds from your retirement account to cover off the loan. It's tough to create broad statements about debt consolidation, but you are a decent candidate if you have an uneasy amount of debt and at least two of these things is true about you: (a) you possess your own home, even though it's mortgaged, (b) you have a lot of debt at interest rates around 20% or more, (c) you've good credit.
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September 2019
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