Debt Consolidation for Effective Debt Reduction

stop living paycheck to paycheckAre you neck-deep in debts? Is your ever-mounting debt getting out of hand? If yes, you must look for an effective solution before things get worse and you are in a deeper financial mess. Do not allow your debts to overpower you and become bad debts because before you realize it, they would make your life real hell.

The best possible way to get rid of them is to pay them off as quickly as possible. You must opt for consolidating your debts. Try consolidating all your loans and opt for an effective consolidated debt loan. Prior to opting for a consolidated debt loan, you need to make a proper and comprehensive list of all your debts. You may be wondering as to how to get going with the list. Preparing the list is not a big deal at all. Here are some effective ways of handling the situation.

Prepare a Comprehensive List of Debts

You need to have a list comprising all credit card statements you are having. If you are having multiple credit cards, then you need to get all the statements in order for each one of them. Once you have all of the statements together, you must calculate the total debt amount you are currently using. You need to examine your statements and find out how much you are paying in terms of interest. Once you know that, all you need to do is to make a list of all your credit card debts from highest to lowest interest rates. This would be a great way to make a start.

Consult an Expert for a Consolidated Debt Loan

Once you have prepared the list, you should be able to determine your next course of action. You should take appropriate measures on your own but if you are unsure about what to do next and how to go about it, it is a good idea to get in touch with a financial consultant who could assist you with  some expert tips and guide you every step of the way. Though you may end up spending some money, it could be a fruitful idea to consult a financial expert. He would be giving you some professional advice on how to go about debt consolidation. He would help you in getting the most-suited consolidated debt loan. For identifying the most suitable loan, you must do ample research. You must have sound knowledge about all the terms and conditions involved and precise interest rates that are applicable to your consolidated debt loan.

Loan Application Process

Once your research is done, it is time for the loan application. If you have done the research and are ready with the papers and relevant documents, your loan application should be approved but in case it is not, you could consider something else such as credit counseling agencies. However, if your loan has been approved, you must pay off all your debts at the earliest possible. Once your debts are paid off, make a stern resolution not to get into debts ever again in future.

Loan Payment Details

You must be very careful and alert regarding the actual interest rate charged on your consolidated debt loan. Read through the loan agreement or contract meticulously and see if there are any hidden fees. Go through the fine print carefully. You must stick to paying an amount each and every month to ensure hassle-free debt payment within a short period of time. If you fix and divert a relatively high amount towards monthly EMI or repayments, it would be effectively slashing down the time period required for paying off the debt. Develop new healthy habits. Do not use your credit cards unnecessarily on frivolous expenses.

Conclusion

If you are opting for debt consolidation, you should be paying off the debt fully. Many people who have opted for consolidated loans often think that they now have access to debt relief so they could enjoy shopping and go overboard with their so-called new money. This is a big mistake. The loan money is strictly for paying off all your debts so that you could start afresh without any debt burden. However, you must remember that people who have opted for consolidated loans necessarily, need to assess their lifestyle and alter spending habits by making slight adjustments to ensure a debt-free existence in future.

Debt Consolidation FAQs to Help You Decide If Is Right for You

For people who are deeply mired in debt, debt consolidation is often suggested as a practical and viable way of sorting out their financial mess. However, there are a number of aspects that you need to consider to establish if debt consolidation is the right route for you. Some common questions:

How Does Debt Consolidation Help?

Debt consolidation can have a number of benefits for you; you can manage your finances better as due to the debt restructuring possible, the monthly payment can go down to an affordable level, you no longer have to monitor multiple debts, and you can get a longer tenor to pay off your debt. As a result, your stress levels can go down and you can enjoy a good night’s sleep.

What Are the Advantages of Debt Consolidation?

There are innumerable ways by which you can accumulate debt; credit card bills, medical expenses, cash advances, and payday loans represent some of the most common ways you can run up debt that can prove to be very difficult to manage. By opting for a debt consolidation plan that you can afford comfortably, you can ensure that your debts are serviced properly and you are able to save something by the end of every month. To ensure that you are not wasting your precious money, you should identify a debt consolidation company that does not charge any signup or registration fees. Referring to online debt consolidation reviews is a good way of doing that. Opting for an ethical debt consolidation company can get you access to expert and unbiased advice on how to best manage your finances and save you from filing for bankruptcy that can end up ruining your credit score for a very long time.

How Much Can Be Saved By Consolidating Credit Card Debt

Credit card issuers are infamous for charging extremely steep interest rates on credit card outstanding. It is quite possible to save a few thousand dollars on interest expense if you can consolidate $25,000 in credit card debt and pay it off with a personal loan in about 24-48 months’ time. This is possible because usually there is a huge difference in the interest rates between credit cards and personal loans.

Is a Debt Consolidation Loan a Better Option?

While you may be tempted to move credit card debt from one credit card to another to take advantage of a lower rate of interest, you will find out that when compared to a debt consolidation loan, the interest rates charged are still very high. Also, credit card companies have the habit of keeping on changing the APR periodically, so you may find the advantage of the low-interest rate disappearing just after a few months. However, to qualify for a debt consolidation at a good rate of interest, you need to have a good credit score, which may not be possible if you have let things slide and missed a payment or two on your credit cards. Also, having swept all your credit card debt into a debt consolidation loan, there is always the temptation to go wild with your credit cards and rack up huge dues again.

How Does Debt Consolidation Affect My Credit Score?

Maintaining a good credit score is extremely important because the ability to take on future debt depends on how high it is. However, often it can become very difficult for you to service credit card dues when they are attracting interest that is as high as 30% and it is natural for you to miss a payment to two, and this is bound to negatively impact your credit score. If you have maxed out your credit cards and take on a debt consolidation loan to settle all the outstanding, it can only positively affect your credit score. However, you should be careful that if the company you approach settles your credit card dues with the card companies for less than the full balance, there will be a negative impact on your credit score for some time.

Conclusion

Debt consolidation can be a very effective way of getting out of a debt trap because of its inherent advantages of being able to take on a loan at a lesser rate of interest as well as the opportunity of being able to restructure the loan tenor to suit affordability and budget.

Author bio: Graham Sheldon is an experienced personal finance consultant working for a leading debt relief company. Graham has also compiled a number of debt consolidation reviews that are a valuable resource for individuals looking for reliable agencies.

Debt Consolidation Loans – All You Need to Know About Student Loan Consolidation

Are your federal education loans bogging you down? Are you looking for a manageable way to repay these debts? Have you tried debt consolidation? You should! Student loan consolidation provides a means for you to cut down your education debts and lead a manageable life.

Even though it extends the loan’s lending time, a debt consolidation loan reduces your monthly payments creating an easier means of student loan repayment. In essence, consolidating student loans is a means of refinancing the loan. Since you may not have enough money to pay for your living expenses and to repay other debts, student loan consolidation will make it possible for you to repay the loans even when you have little disposable income.

Who qualifies for student consolidation loans?

As you know, there are private and federal education loans. Holders of these types of loans are eligible for debt consolidation though the cases are handled differently.

The difference between these two loans is that the federal education loans offer the easiest and the most beneficial consolidation processes. They often have increased payback terms lowering monthly repayment costs. If you have more than one of this, then you may consider getting the loans consolidated.

On the other hand, private education loans are granted and therefore managed by your regular lending financial institutions like banks, state agencies, and college foundations. As a result, they attract higher interest rates which can be variable or fixed. These loans are credit based. This means that your credit score is factored in. Good credit scores equal lower interest rates and vice versa. Low credit score holders are considered a high credit risk.

In line with these differences, you should never consolidate private and federal education loans together.

How to consolidate federal education loans

  1. Get a professional evaluation

The first and most important thing to do is to get your finances evaluated by a professional. Have a sit down with a trusted financial professional and give them details of your whole financial situation.

Your consolidation options and the amount of money you will qualify for is determined by the amount owed and your overall difficulty in fulfilling your current monthly obligations.

This is an important step even when you don’t feel the financial pressure from the student loan. A consolidation plan is a sure path to freeing up more cash through a structured payback system.

  1. Weigh your options

Your options depend on the payment plan you wish to take up. The payment plan can be contingent on your income. In other cases, you have the option of choosing a payment plan that stretches a long time but has the lowest and most affordable repayment costs. These options will be laid out for you by your chosen counsellor or debt consolidation consultant and you’ll have to pick the one that suits you best.

For this process to be fully implemented, you should have your student loan details. These include the login information and the account’s PIN. With this, your consultant will have a clear view of your current situation and how to move forward.

  1. Submit the application

If you agree with debt consolidation after consulting with your financial consultant, you may submit your application for a student debt consolidation loan. The federal debt consolidation application is detailed and once you put in all the details, your application will be processed.

Note that the application will be rejected if you enter incorrect account details or if you omit any information. Thanks to information technology efficiencies, you can send your application online and you’ll receive feedback within a short time.

  1. Loan payment

Once your loan application is approved, your current federal loans will be paid off within 90 days. This is made possible by the fact that the debt consolidation company will have contacted the federal loans department. Approval of your application means that both parties have agreed that debt consolidation is a good solution for you.

  1. Make repayments

Approval of the debt consolidation plan means that your chance to pay the loan at lower and forgiving rates lies with you. If the previous federal education loan repayment plan put pressure on your bank account, consolidation will have lifted off some of the pressure. Monthly repayments should be easy and affordable. Your life should also get better since you can save a little more.

Paying off your consolidated federal education loan in time provides a means of strengthening your credit score. In case you aren’t aware, your credit score is determined by how you repay your loans and other forms of debt. Repaying your federal loan in time at all times means that you have the chance to strengthen your credit score if it is on the brink of putting you in the ‘high-credit risk’ region.

  1. Spend wisely

Once you have lower monthly repayment for your consolidated student loans, you may find yourself with a little extra to spend. Even though debt consolidation loans get the pressure off your back, you should use this as an opportunity to save more and make better investment plans.

Create a reasonable budget and stick to it. Ask for a raise, find a new job, or get a second job, and cut down on credit card debt. Shop with cash always and save a percentage of every income earned.

Consolidating private education loans

You cannot get direct consolidation for your private student loans. To consolidate these loans, you should find a private lender to work with. They have variable eligibility criteria and requirements and you must shop around before making a decision.

A challenge with private loans is the borrowing restrictions that require minimum loan borrowing. Your credit worthiness will be evaluated and this can limit the amount of loan extended to you immensely. Some lenders are also known to charge origination fees and this fee isn’t available for individuals with federal student loans as they qualify for direct consolidation loans.

In conclusion, student loan consolidation reduces your financial burden resulting from debt. Whether you have private or federal student loans, ensure that the payment plan is affordable. Shop around to get the best student debt consolidation plans.

Why Is Debt Consolidation Loan The Most Favored Option Of Those Looking To Turn Their Finances Around?

A majority of us see our credit cards as conduits of a better lifestyle. We treat them as keys of spending habits beyond our current financial means. While our credit cards are swapped we forget that we are the ones who will have to pay the bills and at the end of the year we are stuck with debilitating loans that eat their way into our family finances and credit scores.

In most of the cases we have seen, the burden of multiple credit card debts and other utility bills becomes too overwhelming for families to bear. In such a befuddling financial turmoil most families end up opting for payday loans and 0% balance transfer credit cards. While they do seem helpful, they do nothing but add to the financial burden.

So what is the more financially friendly option?

A friendlier option is debt reconciliation. This merges all your current debts, including your credit card debts and outstanding loan payments, into one. Debt consolidation makes your existing financial situation much more manageable. And in all probability (if you are borrowing the money from the right source), you will end up paying an interest rate that is much lower than the rates you were paying on your multiple credit cards.

We especially recommend debt consolidation loan for those who are standing at the lower end of a good credit score. An existing credit card debt visibly dents your current credit score. When you go for debt consolidation you will automatically be transferring your credit card debts to an installment column that will not interfere with your credit score.

What are the currently existing debt reconciliation options?

Ringing up a debt consolidation company is one of the best things you can do when you find yourself in a sticky financial situation. Although many of these companies are out there to make profit out of the existing finance system, most of their policies are really helpful when it comes to helping people out of a bottomless pit of debts.

Here are the few kinds of debt relief companies that you will come across while looking for debt reconciliation online–

  1. Debt Reconciliation/Consolidation Companies – these are the true helpers during high financial stress. They will lend you money irrespective of the status of your credit score. In most cases the money is loaned out as unsecured personal loans that can be used to pay off all debts, outstanding bills and individual money lenders. After taking out a reconciliation loan you will have to manage just one debt with a fairly low interest rate. We have seen people pay off consolidation debts within terms of 2 to 5 years, with as low as 8% interest.
  2. Debt Management Companies – these are not true debt reconciliation companies. In fact, while looking for debt consolidation, this is one kind of company you need to steer clear of. They work with the lenders you owe money to and they try to negotiate lower interest rates. Although they are authorized and require legal fees, they are hardly ever successful in bringing down the rates and the payments without affecting your credit score.
  • Debt Settlement Companies – they are quite similar to the debt management companies. They work with the lenders as well to help negotiate a lower interest rate and lesser principal payment. Since they deal with the credit card companies and your bank directly, they run a high risk of permanently damaging your credit record in exchange of getting marginally lower interest rates. And did we mention? They charge a handsome fee irrespective of the final outcome of the negotiations.

As you can understand not everything is hunky-dory once you start looking at debt reconciliation options. As a matter of fact, the last two kinds of companies mentioned in the previous section barely make it to the category of straight debt consolidation companies.

While looking for debt reconciliation options and consolidation loans you should conduct a thorough background check on each and every potential option you have. Since testimonies and client feedback are not an option for most debt consolidation companies, you will need to rely on a number of registered website reviews. Do not forget to check official websites, government registered websites and Better Business Bureau before signing any contract with the companies.

What are the mistakes that can further ruin your finances after you get a debt consolidation loan?

Debt consolidation loan is not your key out to financial freedom. You cannot hope to get out of all your debts for good with debt consolidation loans, since you are just transitioning from one kind of loan to another. You may have to pay a lower interest rate on consolidation loans, but you will still have to pay the principal amount.

In case you are hoping to fall back on your credit cards after you are done paying the previous credit card debts, it won’t be long till you find yourself under a mountain of unpaid bills and defaulter’s notices once again. You will be plagued by terrible credit scores that will disqualify you from getting any further loans from registered banks and credit unions. Getting out of a financial fiasco takes a certain level of commitment where you should keep yourself from using your credit cards at every excuse.

So unless you are ready to cut up your credit cards, device a practical budget and are ready to live within your means you should not be applying for a debt consolidation loan right now.

Conclusion –

Debt consolidation is not the best option always, but it is also the only option for most with bad credit records and a cornucopia of unpaid debts. At the end of the day, it is definitely a relief to know that all your credit card bills and other minor loans are paid off and you are paying a much lower interest rate. If you follow a structured spending plan and enforce restraint on your spending habits, debt consolidation can definitely become the fastest vehicle to lead you to a debt-free life.

How to Spot and Avoid a Student Loan Scam in Debt Consolidation

The increase in student loan debt has been precipitated by two things; easy availability of loan products and an increasing demand for university education among all age groups. According to the U.S Bureau of Statistics (BLS) the average class of 2016 student has a loan debt of $ 37,172. The total student loan debt is around $1.26 trillion.

Over 44 million Americans have student loans and it is no wonder there are so many companies out there promising to reduce your loan amount or wipe it off completely. Whether you are applying for your first loan or trying to repay your loan it is important to understand the industry is fraught with risks. With the advent of online loans things are even more complicated.

You need to learn everything about student loan scams in order to avoid them. Millions of students have filed complaints but these always come too late. Most of the scam companies will close shop once they have scammed several students and mutate as a new company offering similar services.

The only way to avoid a scam is to understand the risks and learn how to identify a scam from a mile away. Here are some pertinent points to guide you.

Types of Student Loan Scams

There are many variations of student loan scams some which seem very genuine. The most common include:

  • Loan consolidation scams: This is one of the most common student loan scams and a company will advertise an offer that looks so good to resist. Once you have communicated about the number of loans you want to consolidate the company will offer the best interest rate in the market to consolidate your loans. But there is a catch; you have to pay an upfront fee which is disguised as an administration or processing fee. Once you pay this fee the company does nothing and you lose your money. The best company offers easy methods of consolidation without charging any fees.
  • Debt elimination: There is no way you can eliminate your student loan because you singed a legally valid contract. If a company offers student loan elimination ideas keep running and don’t look back. This is an easy scam to fall for and it comes with initial fees. Once the company collects such fees from thousands of students it disappears.
  • Advance fee scam: This is the most common scam in the industry. A company will approach you with the promise to get you the best loan rates in the market but you will have to pay an advance fee too enjoy the lower rates. The Consumer Finance Protection Bureau is now prosecuting these companies because they make a promise they can’t deliver. Legitimate student loans from any quarter don’t require any fees and you should never fall for such a scam.
  • Debt relief and forgiveness: This scam involves a promise to get most of your loans forgiven or getting you a lower rate. What actually happens is that the firm goes for the option of consolidating loans and you will never realize until you contact them later. In most cases you will have to pay for these services.
  • Law firm scam: While loan negotiation might sound like a good idea you might end up losing your money. A law firm will convince you that they have the expertise to negotiate with lenders and while this might be true they don’t repay the money during these negotiations. Your credit score will take a hit and eventually the law firm might even abandon the negotiation meaning you will start from scratch.

There are also companies which offer legal but unnecessary student loan services at a fee. For instance filling out your online government loan is free but such companies make it sound too complicated. At the end of the day you will be losing money while the priority should be saving every dollar.

Warning Signs for Student Loan Scams

Here are some ways to spot if you are about to fall for a student loan scam:

  • Need for payments: Online scams are after a quick buck and all their services come with upfront fees. Applying for a student loan from the U.S. Department of Education is free and anyone charging you to consolidate your loan is out to make a profit from you. Debt consolidation from studentloans.gov is free and this should be your first stop.
  • Persistent calling: If you contact an online company asking for loan assistance they should provide what you need and that should be the end of it all. However, if they start bombarding you with calls and texts it is highly likely the company is a scam. A loan company should be professional and must not harass you into taking a loan.
  • Who initiated contact? If a loan service calls you that by itself should be a red flag. You are the one in need of a loan service and you should initiate contact. You don’t know about the company and you should immediately terminate any contacts.
  • Claim of official connections: If a company approaches you with official sounding titles or claiming to have a connection with the U.S. Department of Education or official loan consolidation platforms run and don’t look back.
  • Paying on your behalf: This is the easiest scam which the Consumer Finance Protection Bureau warns all graduates about. There is no logic in someone holding your money as they negotiate on your behalf with creditors. Such companies will claim they are still negotiating as you continue depositing monthly payment to their account. They then go under carrying thousands of dollars from unsuspecting clients.

If you are to avoid a student loan scam you need to take time and research.  You need to understand what loan consolidation is about and the best providers of such services. Carry out background research for any company you intend to contact. More importantly check the company’s BBB rating, reviews and any mention on online scam platforms.

Loan consolidation companies should offer advisory assistance for you to get the best services but are not a magic wand to eliminate your debt.