debt consolidationDebt Consolidation is a dilemma many people face at some time in their lives. A financial crisis caused by personal or family illness, the loss of a job, or overspending can seem overwhelming. However, your financial situation doesn’t have to go from bad to worse, the answer could simply be a debt consolidation.

The average U.S. citizen pays 11 different creditors every month. Making one single payment is much easier than figuring out who should get paid how much and when. This makes managing your finances much easier. A debt consolidation loan online is fairly straightforward…just contact several lenders and tell them that you are shopping for the best deal. They will compete for your business.

Debt consolidation can lower the high interest rates you are paying on credit cards. Free debt consolidation allows you to make one payment a month that is substantially lower than all of your credit card bills combined, that leaves you extra money each month to add into your budget.

Often offered through credit counseling companies, these consolidation loans come with the benefit of having someone work with you to budget a way to pay your debts off. Often the consolidation company will negotiate on your behalf with the credit card companies to actually lower the amount of money you owe. This is a great option if you don’t own a home that you can use for a home equity loan.

A consolidation loan is a loan that you can use to pay off all your debts, meaning that you can pay them off for less money without having to worry about lots of different bills. Like anything, though, consolidation loans have their advantages and their disadvantages, and it pays to take a careful look at what they offer before you commit yourself. Chances are that any interest rate you’re offered on a debt consolidation loan will be significantly lower than the interest rates you’re currently paying.

If you have a lot of cards at a high rate then debt consolidation could be a very good idea. Negotiate with several companies. Make lenders compete for your business by letting them know that you’re shopping for the best deal. Ask each lender to lower the interest rate. And ask each to meet — or beat — the terms of the best offer.

A common means of debt consolidation is a home equity loan. The interest rates will be lower than most other consumer debt interest rates since your loan is secured by a mortgage.

Debt consolidation services may be your answer to restructuring your finances. Are you falling farther and farther behind in your monthly payments, looking at the possibility of foreclosure or bankruptcy, buried under credit card debt, or a recent graduate who needs a little extra time and breathing space? Professional debt consolidation services can help by offering acceptible options to your creditors and even re-negotiating your contracts and loans. Many lenders will give you a home equity debt consolidation loan even if you have bad credit.

Another popular option is the second mortgage. Like the HELOC, it is also secured by your mortgage. Understand that your house is collateral, and if you don’t make the payments you could lose it. If you do not own a home, or the home you own does not have enough equity in it to borrow against, it is still possible for you to get a consolidation loan. In order to get approved for an unsecured consolidation loan, you need to have good credit.

Often the debt consolidation companies will negotiate on your behalf with your credit card companies to actually lower the amount of money you owe. A debt consolidation program may require professional counseling. The first step is often developing a budget. How much money do you take in and how much money do you spend?

A debt consolidation program will need a list of your income from all sources. Then, a list your “fixed” expenses — those that are the same each month — like mortgage payments or rent, car payments, and insurance premiums.

A counselor may recommend that you enroll in a debt management plan (DMP). A DMP alone is not credit counseling, and DMPs are not for everyone. In a DMP, you deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts.

Your debts can be unsecured or secured. Secured debts usually are tied to an asset, like your car for a car loan, or your house for a mortgage. If you stop making payments, lenders can repossess your car or foreclose on your house. Unsecured debts are not tied to any asset, and include most credit card debt, bills for medical care, and signature loans. Unsecured loans typically have much higher interest rates. Also, interest paid to a credit card is money down the drain, whereas, interest paid to a mortgage can be used as a tax write-off.

If you are a homeowner, you may be able to consolidate debt through a second mortgage or a home equity line of credit. Since these loans are secured by collateral (your home), the interest rates will be lower than what you pay on credit cards, signature loans, etc.

A debt consolidation loan can be used to pay off all your debts, meaning your old debts are gone and you now have only a single payment to be concerned with each month. You can consolidate your debt through a 2nd mortgage or a home equity loan and lower your monthly payments. Remember that these types of debt consolidation loans require you to put up your home as collateral. If you can’t make the payments — or if your payments are late — you could lose your home. A home equity line of credit “HELOC” offers a great deal of liquidity along with low interest rates. Presently, a line of credit can cost about 4% or 5% a year. Second mortgages are generally considered to be a higher risk than the original mortgage, since the lender which issued the original mortgage has first rights to the property… because of this, interest rates for a second mortgage are usually higher than those for the primary mortgage.

Debt consolidation counseling begins by first helping you develop a budget. How much money do you take in and how much money do you spend? You will asked, in debt consolidation counseling, to make a list of your income from all sources. Then, list your “fixed” expenses — those that are the same each month — like mortgage payments or rent, car payments, and insurance premiums.

If you fall behind on your mortgage, contact your lender immediately to avoid foreclosure. Most lenders are willing to work with you if they believe you’re acting in good faith and the situation is temporary. Some lenders may reduce or suspend your payments for a short time.

A counselor may recommend that you enroll in a debt management plan (DMP). A DMP alone is not credit counseling, and DMPs are not for everyone. In a DMP, you deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts. Debt consolidation help includes credit counseling, advice on managing your money and debts, help developing a budget, and free educational materials and workshops.

Debt consolidation counselors, certified and trained in the areas of consumer credit and debt, will discuss your entire financial situation with you, and help you with a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions. If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan (DMP).

A DMP alone is not credit counseling, and DMPs are not for everyone. You should sign up for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money. In a DMP, you deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors.

Debt consolidation information may include advice on lowering your cost of credit through a second home mortgage or a home equity line of credit, the two most common forms of debt consolidation. The home equity loan (HELOC) offers lower interest rates than other types of loans since it is secured by savings (equity) in your home. If you fail to make the loan payment, you could lose your home. A second mortgage, on the other hand, generally has higher interest rates because even though secured by your home, the first mortgage lender has priority in case of default.

With a debt consolidation, you only have one creditor to deal with. If there are any problems or issues, you will only have to make one call instead of several. Always negotiate with at least four lenders. Let them know that you are shopping for the best debt consolidation rates, and ask them to meet or beat the best deal you’re offered.

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