Consolidating debts – An All-Encompassing Guide

What is Debt Consolidation?
Debt Consolidation is a temporary debt relief process that involves the securing of an entirely new loan in order to service or pay off several already-existing debts. Although, this could portend a smart way of controlling your finances, it may not always be the best option for you.
In simple words, debt consolidation is the process of where a debtor centralizes his all debts into one location. The purpose of doing so is to lower the monthly payment by consolidating all debts into a single one which has the lowest interest rate. In this manner, a debtor can get rid of a debt that involves higher interest rate.
What are the processes involved in consolidating debts?
Debt consolidation which is becoming increasingly common among most UK citizens has the potential of eliminating or reducing one's debt which greatly affects one's credit score positively.
Here are some steps towards processing debt consolidation
Step 1: Look closely at yourself and determine if you are on the right path in the choice of debt consolidation as a way of eliminating your debts.
It can be very much tempting to pay off certain burdensome loans or cut down to a great extent, the number of incoming bills. However, this is something which you must look before you leap.

Have you taken time to go through your credit score with a view to considering it?
Do you know that you may not be interest-rate qualified if a good number of debts have created trouble for you in the past?

Have you tried talking things over with your lender with a view to re-negotiating before embarking on this debt consolidation plan of yours? Do you think the difference would actually be made with lower interest rates? Are you aware that lower rates are given by most mortgage lenders, major credit card companies and student loan administrators in order to avoid a situation where their debtors default on loans?

Are you being realistic and honest with regards to paying back any extra borrowing?
Step 2: Doing the Debt Consolidation Process Yourself
Having decided on pursuing the path of debt consolidation bearing in mind the fact that it is the best solution for your financial crisis, all you require is astute discipline and organization in order to turn out a workable plan.
It is possible to work out a good plan without the help of debt professionals, although this usually depends on the individual's total financial standing inclusive of assets.
Home Equity Loans could just be the right answer for homeowners who wish to undergo debt consolidation. In this case, it is usually referred to as a secured loan because of the fact that the home is used as the collateral. You must however note that defaulting in payment would result in foreclosure and that the interest being paid on this kind of loan is usually tax refundable. Another interesting way of consolidating your debt is by refinancing your car.
Consolidating debts which are projected by credit cards with high interest rates could be achieved by transferring the existing balances in them into credit cards with lower interest rates. You might be quick to discover that your credit score rating might still be able to grant you a much-lesser rate on the new card compared to the one available on the card used previously.
Other possibilities such as borrowing from friends and family or even retirement savings are available. However, you should note that you stand a chance of being penalized with some taxes and fees.

Step 3: Engage the Services of A Debt Consolidator
You could save yourself a lot of stress by hiring qualified debt consolidation personnel to guide you through the various processes involved in debt consolidation. Experts usually advise taking this route first, before trying it out on your own.
You would feel more at home with a consumer credit counselor because they are perceived to be non-judgmental in areas concerning debt. However, it is very important to be careful in the selection of a debt consolidation professional as there are quite a number of bad eggs amongst them.
You could check them up through the National Foundation for Credit Counseling - NFCC for full information about them, their fees and their mode of payment. Although, quite a number of them present you with a schedule that determines that you pay them upfront.

Conclusively, it could be well said that one must look before leaping when it comes to debt consolidation as it requires careful planning, organization, research and due diligence.

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