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debt Consolidation Solution - How To Know What Your Solution Is

Written by: Carrie Reeder

If you’re struggling with debt, you may find that debt
consolidation could be your solution. There are a few basic
types of debt consolidation, and familiarizing yourself with
their primary features will help to choose the best debt
consolidation solution for your individual financial situation.

debt Consolidation Programs

In some circumstances, the best debt consolidation solution is
to find a good debt consolidation program. Providers of this
service will negotiate with your creditors, typically obtaining
a reduction in interest rates, ensuring that more of your money
goes toward the principle of the debt, reducing the debt faster.
This approach blends negotiation with aggressive financial
planning. One of the advantages, in addition to debt reduction,
is the development of the financial skills you need to avoid
being in this situation again.

There are two general types of debt consolidation programs,
those that are run for profit and those that are non-profit.
Both charge fees, and both approach the problem in similar ways,
though there are slight differences in the closing of open
credit accounts. Non-profits often require that all open
accounts be closed and for-profits may allow you to keep one or
two open. Claiming non-profit status does not guarantee the
honesty or quality of a debt consolidation program, you’ll have
to assess non-profits in the same way you would for-profits.

A good debt consolidation program will charge reasonable fees,
most generally monthly. They will be able to estimate the full
payment date of each account. You should beware of companies
that make a big deal out of their non-profit status, using it as
part of a hard-sell approach. If a debt consolidation program
offers to reduce your monthly payments, rather than your
interest, or offers debt settlement, be careful. Find out exact
details and get a second opinion.

debt Consolidation Loans

In some circumstances, a debt consolidation loan may be your
solution, one that will allow you to reach your goal of
financial control sooner. However, you’ll need to be careful, as
in many cases, you’ll be betting your house - in the form of
collateral for the loan — on your ability to manage the monthly
payments.

Getting a debt consolidation loan and paying off creditors at
once, then making the monthly payment to the lender can feel
like a fresh start. In choosing your lender, look for reasonable
rates and fees, as well as a record of good business practices.
An especially important quality is making payments on time. Some
disreputable lenders hold back payments for a period of time,
adding the bank interest to what they profit in fees and loan
interest charged to you.

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