Debt Consolidation: One Payment at a Time

The current state of the economy means that people are facing trouble paying their bills. Consolidating your debt can help you better manage what you owe.
erasing debt
By AmOne
Updated on: November 7th, 2022

erasing debt It doesn’t take an expert to tell you that times are tough. The current state of the economy means that people just like you are facing trouble paying their bills. Between past due notices from creditors, telephone calls from debt collectors, and worries about losing a car or even a home, you might feel as though you are running out of options.

While you can’t erase your bills, there are options available to help make your payments easier to manage.

The Run Down

  • There are several options available for you to help manage your debt.
  • Debt consolidation means one monthly payment to pay off all of your debts.
  • Many debt consolidation loans come in the form of equity loans.
  • If debt consolidation works for you, some consolidation lenders will renegotiate on your behalf.
  • There is some risk involved with debt consolidation, so it is important to receive solid advice from an expert.

It may help to know that when it comes to these worries, you’re not alone. Even in good financial times, many people face an economic crisis at some point in their lives. The reasons vary; it can be the loss of a job, overspending, or a personal or family illness – regardless the reason, it can seem overwhelming. More often than not, your financial hardships can be overcome, keeping your situation from going from bad to worse.

There are options available to help you get out from under mounting debt. Available options include credit counseling, debt settlement, debt consolidation, and personal loans. Some consolidation lenders will renegotiate with the creditors on the debtor’s behalf, as a credit counselor does. How do you know which will work best for you? It depends on the debt level, how much self-discipline you have, and the prospects for your future.

One of the ways in which you can lessen your financial burden is through debt consolidation. Debt consolidation is the process of getting one loan with a single monthly payment to pay off all your debts. The single payment is usually much less than the total of the minimum payments on the number of loans or debts.

Typically, debt consolidation occurs when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. The introductory rate for a credit card may as much as triple, making payments sometimes difficult to keep up with.

Debt consolidation loans are available through banks and other financial institutions. There are even finance companies that specialize in loans to pay off credit card debt. Many debt consolidation loans require collateral to secure the loan. If you have equity in your home, the debt consolidation might take the form of an equity loan. An equity loan is a second mortgage or debt secured with the equity in your home. For example, if your house is valued at $150,000 and your mortgage is $120,000, then you have equity of $30,000. This amount could be borrowed to pay off high-interest credit cards and accounts. The interest rate is generally much lower, making the payments more affordable.

Sometimes, debt consolidation companies can discount the amount of the loan. For example, if you’re in danger of bankruptcy, the debt consolidator will buy the loan at a discount. You may want to consider researching various consolidators to see if any may be able to provide a discount for your loan situation. Keep in mind that if you’re going into bankruptcy debt consolidation could affect your chances at discharging some of your debt.

When you own property such as a home or a car you may be able to get a lower rate through a secured loan using that property as collateral.

Keep in mind that failure to pay the second mortgage could result in losing your home to foreclosure. Remember that these 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.

If you’re thinking about getting help to with your financial situation, such as debt consolidation, make sure you research all options available to you. Learn the kinds of services a business provides and what it will cost you. Consider other people’s experiences. This is a major decision that involves spending your money, a decision that could go toward paying down your debt and helping you get out from under your financial burden.