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It seems to be the question of the hour today, so I figured we dwell on it for a while. When you’re drowning in debt, sometimes it’s hard to know what path to take in order to get out of debt. There’s bankruptcy, debt consolidation, debt counseling, debt settlement, and then there’s the path where you do nothing and just hope it all goes away. My advice, don’t take the latter.
Basically, debt consolidation is taking all of the credit card debt that you are in, each with probably a high interest rate, and consolidating them into one monthly payment with hopefully a smaller interest rate. Seems simple, right? Well, if you read the fine print you’ll realize that it’s not as easy as it may seem.
One of the problems with debt consolidation is that going down this road usually takes good, or at least decent, credit. If you are drowning in debt and have many credit cards on their way to collections, you probably do not have good credit. If you do find a company that offers debt consolidation loans and options to those with bad credit, keep your eye on the fine print. There will more than likely be a sea of fees and upfront costs coming your way, as well as finite guarantees stating that if you do not pay off your debt consolidation loan there will be huge consequences.
If you are considering debt consolidation companies, do your homework. Make sure there are no upfront fees and no hidden print that will inevitably put you at risk later. Debt consolidation companies will sound like the easy way out, offering better interest rates, but if your credit card rates are at 25 percent, and the debt consolidation company is offering 21 percent, it’s still not a good interest rate. Debt consolidation companies might also end up charging you more in interest, but have worked it out so that your monthly payments are lower. In reality, you are paying more in the long run to get out of debt.
The best move that you can make is to either ‘cowboy-up’ and find a way to pay off your credit card debt on your own, or get help from a debt settlement company. If you chose to pay off your debt on your own, good for you! It’s hard work, and will take extreme dedication and willpower, but it can be done.
If you chose to use a debt settlement company, they will take the stress out of dealing with you creditors and worrying about harassing phone calls. Debt settlement companies will negotiate with your creditors for you, and even set you up with an easy to use savings account. They’ll negotiate a monthly deposit amount with you that will fit within your budget, and while you’re working to build up that savings account they’ll harass the creditors for you. They’ll get your settlement down to a reasonable rate, usually you original balance (or lower) with no extra fees or interest rates tagged on.
When deciding whether to you a debt consolidation company, or a debt settlement company, even simply the names of the two distinct paths offers some reassurance. The debt consolidation company will probably get you into deeper debt, while the debt settlement company will do just that, settle your debt.
Posted July 23rd, 2009 by Anonymous
