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Debt Consolidation Secrets You Can't Live Without

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By Author: Nicole Anderson
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Anybody would like to reduce his or her debt. Therefore, he or she looks at the debt consolidation with great intentions. However, there are several things to take into consideration if you want to make it successful. The following article will guide you guide you about everything related to it.

Today as you may know America is known as a country of debt. However, because of this the debt consolidation business is booming. Nevertheless, you should be aware that only some of them are really helpful.

Debit management companies
As mentioned earlier debt management is a booming business and therefore many debt management companies have sprung up everywhere. They will claim that they will take your debt and ask for lower payment, at times lower interest rates, for paying your debt. In such cases, you make onetime payment to the debt management company and the payments will be appropriated by it.

However, here the problem is that the debt consolidation can shamble your credit. When if after having a debt management solution, you seek a conventional, FHA, or VA loan, the bank will treat you as if you have ...
... claimed for a chapter 13 Bankruptcy.

Debt may decrease or go away completely however in any case you will be left in a cash only financing situation. It may happen that you will need to pay $400+ deposit even if you want to join some phone call service.


Getting loan for Debt consolidation
Getting a new load and adding it to the current debt and thus reducing the monthly debt payment also is a very good option for debt consolidation. For example, you can take a $1000 debt payment and in such a case, you can lower the debt payment to $600.

Let us briefly understand how this actually works.

Debt consolidation example
Your debt is $30,000 in the form of unsecured debt.
Debt breakdown is 2-year loan of $10,000 at the rate of 12% per annum, and a 4-Year lone at the rate of 10% per annum.

Current debt payment for a month for a $10,000 loan is $17 and $583 forth e$20,000 loan. Thus, the total payment for each month becomes $1,000.

In this situation, the company can lower your payment to $640 for each month and the interest rate to 9%. For this the will negotiate with you creditors and then combining the loans into a single one.

Reality of this Solution from the company:
You may feel that paying $460 in place of $1,100 is better; there are some things they hide from you.

Instead of 2 and 4 years, you will need 6 years to do so.

Even this may not be considered bad when we take into account the relief you will get from such a lower monthly payment. However, there is something more to it.
The gross payment you will have to pay on this new loan increases to $46,080 from $40,392 that you would have to pay for the original loans at an interest rate of 9%.
Thus for the lower payment you are paying $5,688.

However, this solution is not all that you need think of when you consider specifics.
Moreover, your credit also will suffer because of the size of the available credit line and high balance.

Credit card debt consolidating
One of the statistics says that 78% of people who consolidate their credit card debit have to bear debt growth back. This happens because once you consolidate your credit card debit; the balances of individual credit cards become zero.

As in most of the cases the company does not address genuinely the root cause of the financial debts you are facing, you may just charge back up the credit cards once more.
Thus, often you find that instead of getting it paid off in an easy and faster way, the debt has actually doubled.

Debt consolidation and debt issues
The basic aim should ideally be to solve the debt problems, increase your credit score and lower the current debt. However, the debt consolidation will not solve the debt issues. The only genuine solution available for them is paying them off.

The following points are very crucial if you want to gain financial freedom.
Try to gather some money with which you will be able to pay back all your debt.
For this prepare a proper plan and stick to it.

From here onwards, do not take any new debit.

Take care that you make all the payments in time so that you do not get any negative credit marks.

Below given are some tips with which you will be able to handle your budget effectively.
If you are not able to make payments on time, consult your lender, negotiate, and try to find a way through which you will be able to get back on track.

However, note that whatever arrangements you decide on, the payment should be in full and try to halt negative credit markings.

Check whether you are owed unclaimed money. You can owe it from the $40+ billion in missing money of the nation. In this way, you can alleviate some of your financial issues.

During paying off or pay down of credit cards, consult the company and decrease your credit limit. This will avoid further accumulation of debt and thus limit you available credit that will increase your credit score.

Check out whether the credit card company can reduce the interest rate for you. Most of them often do this if their clients have high interest rates. In such a case, it may consider a threat of transfer of your debt to a new company having a lower interest rate.

Avoid making this as a vale threat, instead transfer the debt to a card, which offers lower interest rate as well as reduces the credit card limit on your account by some hundred dollars or almost your amount itself.

Do not close the account if it contributes to you credit scores because of the reason that you had for quite sometime as well as made your payments on time.

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