Know About The Debt Consolidation FAQs From Reliable Sources

When you have to deal with your multiple debts then consolidating them is the best process as you will be able to combine your debts into one and make your personal as well as financial life easy. However, you may be a bit apprehensive about it given the fact that you already are in a financially stressful situation with so many seemingly unmanageable debts to take care of that is taking away your sleep, peace in mind and your good health as well. 

It is natural to be apprehensive under such situations but with a little bit of knowledge, you will know that this is not a very bad idea after all. All you have to do is to find a reliable source on the internet to know more about this type of loan. You may also get in touch with an expert debt counselor for that matter.

However, under no situation and circumstances should you jump into any conclusion without proper knowledge, research or time to make the final decision and visit a traditional bank for such a loan or any other sources such as nationaldebtrelief.com for any other kind of debt relief assistance.

Different questions and answers

The most common questions asked by the consumers will help you to deal with the apprehension you have with debt consolidation. Here is the list of questions.

·  Is debt consolidation bad? – Debt consolidation is never bad if you are strategic and follow it properly. However, it can be if you do not make the necessary changes to your habits that may have put you in such a situation in the first place. If you continue to spend impulsively using your credit cards or even take out more loans that you cannot afford to pay off with your current financial situation, rolling your existing debts into one will make the situation even worse.

·    How to consolidate debts and pay it off? – The best way to do it is to make a list of all the unsecured debts that you owe along with the amounts. Add this up and find out whether or not you will be able to pay this amount every month. Give yourself a time window of 3 to 5 years to reach to your goal of financial freedom. With these specific facts and figures in hand set out to look for the best lenders and ask about their payment terms of the debt consolidation loan including the interest rate, the loan tenure, monthly repayment structure and other terms regarding fees and prepayment penalties. Compare the costs of different loans and then choose the best loan and lender.

·   What type of loans to consolidate? – Debt consolidation loan is most suitable for combining all types of unsecured debts such as credit card debts, medical bills, student loans and any other type of personal loans.

·  What are the best loans? – There are different types of debt consolidation loans you can choose from but which one will be most suitable for you will depend on the amount you owe. Typically, some of the best consolidation loans are personal loans, credit card balance transfers, home equity loans and any unsecured debt consolidation loan. For credit card balance transfers you will need a good if not an excellent credit score. For a personal loan you can try out peer-to-peer online lending which has become a popular and reliable outlet now for such loans. If you take out a home equity loan which is secured by your home as collateral you will get better interest rates but will also have the danger of losing your house if you miss payments. The unsecured debt consolidation loans are good as there is no asset risk but you will have to pay much higher interest rate and also possibly get a much shorter repayment period.

·  Who qualifies? – Any person having a good credit score can qualify for a debt consolidation loan. However, what is good to one particular lender may not be the same for another. Therefore, make sure that you know your credit score before you approach a lender to prevent your application from being rejected or get a loan that will have a higher rate of interest, lower amount and lent for a shorter period just due to higher credit score requirement.

·   How to consolidate debts without a loan? – The only way is to follow a DMP or Debt Management Program. These types of programs are designed by a professional credit counseling agency after considering your monthly income and other expenses to create an affordable budget. You will have to follow this budget strictly for a long period often five years or more which is not easy as it seems and is also one of the primary reasons that most debtors fall out of such programs early making it unsuccessful. Therefore, more than you focus on selecting the best credit counseling agency focus on your willingness to continue with such a program. However, a reliable and reputable credit counselor may also work with your creditors to lower the interest rates and even try to eliminate some fees.

·   How does it affect your credit? – A debt consolidation loan will never harm your credit score. As long as you continue to make the new payments on time and till the end of the tenure, it will leave a positive mark on your credit report. This is because a debt consolidation loan will not reduce the amount but only the number of creditors. However, there are two major factors to consider here namely what type of debt consolidation program you use and how committed you are to make the payments on time. A DMP will have a negative effect for a short time but will surely improve when you continue making the payments on time. On the other hand a debt settlement will damage your credit score as the amount will be reduced and such an effect will stay in your credit report for seven years.

Therefore, it will not cost you much to consolidate your debts as the fees are not overwhelming and noting is taxable

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Created on Mar 25th 2019 07:15. Viewed 1,343 times.

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