Are you struggling with tens of thousands of high interest credit card debt? Do you feel buried by high
interest and high payments? One of several forms of debt consolidation may be a viable option to
consider. Continue reading to find out how debt consolidation may be able to help.
Some debt consolidation firms claim to be “non-profit” which does not mean they are trustworthy or
that they will be honest about their program. Some lenders with high interest rates refuse to work with
non-profit debt consolidation companies, especially most payday loan and high interest installment loan
lenders. All non-profit consolidators are paid for by the exact same creditors that you owe money to, in
addition to fees they charge you. Just like a typical debt collector, they are paid for by your creditors to
collect as much money as they can from you to pay your creditors. This means a non-profit credit
counselor will always be required look after the creditors best interest rather than yours.
Bankruptcy is an option some people consider other than debt consolidation. Filing for bankruptcy is a
serious decision that can have serious future consequences. The Bankruptcy Reform Act makes it more
difficult to discharge debt in a Chapter 7 and more people are forced to pay back some or all their debt
in a Chapter 13. Some lawyers refer to a Chapter 13 as a form of “debt consolidation” since you would
make one payment that is usually deducted from your paycheck to then be divided among your
creditors in the manner decided by the bankruptcy court.
Make no mistake that a Chapter 13, just like a Chapter 7, is an expensive bankruptcy that will likely be
public record for the rest of your life. Using another form of debt consolidation may be a way to avoid
bankruptcy. Using another form of debt consolidation could be more expensive or less expensive
compare to a Chapter 13 depending on your situation and the consolidation option it is compared to. If
you are trying to save a home from foreclosure, a vehicle from repossession or if you have very little
income or assets, then a bankruptcy may be the best option. You will need to speak to a qualified
bankruptcy attorney if you decide to go this route.
Using a debt consolidation loan is an option only if you have very good credit scores and good income. If
you qualify then you may save money on interest costs and will only have one payment to make each
month. If you are consolidating your debts using a low interest credit card, make sure you pay it all off
before the interest rate changes to a much higher one.
Mortgage rates are generally much lower than your credit cards and even lower than most unsecured
consolidation loans. Now is a great time to consolidate by using the equity in your home if you have a
very good handle on your finances and have enough available equity, income and high credit scores.
Depending on your situation, your new mortgage payment could end up lower than it currently is even
with the additional debt balance added to the mortgage. A mortgage loan used for debt consolidation in
Texas may be difficult to obtain because Texas law requires borrowers to have at least 20% available
equity after the new loan is completed. If you have owned your home for a long time or put a very large
down payment, then it is possible you will have enough equity to pay off your unsecured debt. The
available equity that can be used for the loan will be reduced by any associated fees such as those
charged by the lender, appraiser and the title company. Keep in mind that if you pay unsecured debt
with your home and at some point, you cannot make your mortgage payment then the lender will
Refinancing your mortgage may allow you to consolidate your debts and is often an alternative to a debt
consolidation program or higher interest unsecured debt consolidation loan. The monthly savings from
refinancing your mortgage can also be put towards other outstanding debts.
If you decided to use a credit counseling or debt negotiation form of debt consolidation, be certain to
choose a reputable company. If something appears too good to be true, then it probably is. Get all your
questions answered before signing any documents.
Locate a debt consolidation company in Texas. Using an out-of-state company can cost much more due
to fee caps in Texas and the out-of-state company may not be familiar with the consumer protection
laws in our state. Generally, there are two types of debt consolidation services aside from consolidation
loans. The first lowers your interest rates and is also referred to as credit counseling. The second is a
debt settlement or debt negotiation program that will negotiate reductions in your balances. Each
program has pros and cons.
Also make sure any company you are considering is licensed in Texas. Even some companies located in
Texas try to fly under the radar without licensing and may charge illegal high fees. Licensing for this
industry requires specific bonding and registration with Texas Office of Consumer Credit Commissioner.
You can check licensing status here: https://alecs.occc.texas.gov/Generic/AdvanceSearch# or call (512)
Always ask about the fees that you will have to pay your debt consolidation agency. Your agreement
should provide a detailed breakdown of what they will charge and when they will charge it. Debt
consolidation professionals are not able to charge you any fees before performing a service. Never pay
fees just to set up an account with a company. Any third-party fees such as those for your special
purpose savings account or separate services that are not provided by the debt consolidation agency
should be fully disclosed and should be fair and reasonable.
Do you feel that some form of debt consolidation is the answer for your issues? Paying off your debts
that accrue interest can save you money and improve your overall financial profile. If you can easily
afford the payments that you are currently making but your interest rates are high, a debt consolidation
program that simply lowers your interest rates may be the best option. Remember that in order to build
wealth you must quit paying interest and start earning interest. If you need to save as much money as
possible every month and get out of debt as quickly as possible then consolidating using a debt
negotiation service may be your best option.
Before calling a debt consolidation company, write down the details of the debt you need to pay
including the balances, the minimum amount due every month and the due dates. Consolidating on
paper will help you get a better view of your overall situation. If you do not have your current loan or
credit card statements, then you may be able to access them online. A reputable debt consolidation
company will be able to pull your credit report at no cost which will also list your debt balances, but it is
still a good idea to compare the balances reported to the credit report with the balances listed on your
most recent statements.
Remember, do not fall for offers from any type of debt consolidation company or lender that seem to
good to be true.
You may not need debt consolidation if you have a very good interest rates and you can easily afford
your monthly payments. You may just need to pay more towards your balances. You can start by paying
your smallest debt off first and then applying the amount you were paying towards it to your next
smallest debt. Continue the process until all debts are paid off. This is called the roll up method and is
effective if you are dedicated to applying the funds and discontinuing all credit card charges. This option
will not work if you are struggling to make your current payments.
Consider your long-term goals prior to reaching out to a debt consolidation agency. Are you planning to
take on more debt soon or do you need to get out of debt so that you do not continue to throw away
money to high interest? Are you going to fall behind making your payments or are you all already
behind? The hardest question to ask yourself is if you are letting debt steal your ability to save and
invest for retirement. If you have a lot of debt but you do not have any savings or investments, then it is
time to stop the cycle now. A credit score will not help you to earn interest and retire. Your credit score
may be keeping you broke, and, in many cases, a good credit score won’t even let you obtain more debt
if you already owe too much.
Paying off your credit debt thought a debt consolidation loan may boost your credit score because high
revolving debt balances (credit cards) are calculated in a way that harms your credit score. Using
another form of debt consolidation such as credit counseling or debt negotiation may lower your credit
score depending on your current status. A reputable debt consolidation company will explain your
options and the impact it may have on your credit score.
Companies with low ratings and many complaints against them are companies you should stay away
from. Many companies use fake positive reviews to try to hide the real negative reviews.
It can be very hard to get a consolidation loan. Lenders know your risk, so they're going evaluate the risk
before extending you more credit. If you are having trouble paying your existing credit, then you will be
considered a very high risk. First try the bank where you do your checking since they know your financial
situation better than a new lender would.
If you are considering a debt consolidation service rather than a loan, find debt consolidation counselors
that offer free consultations. Charging for a consultation may in fact be illegal. You need to explain your
current financial situation and how much debt you have.
There are many unscrupulous lenders that are just loan sharks in disguise. There are many consolidation
companies that will take your money but provide very little benefit. In either case look for reviews that
offer insights into the companies see how many complaints they have. Any pattern of negative reviews
that point to very specific problems are likely to indicate the company is not acting in the best interest of
its customers. Positive reviews that are generic in nature are likely to be fake.
If you qualify for an unsecured debt consolidation loan, we do not recommend taking any additional
cash over the amount needed to pay off your high interest debt. Many debt consolidation loan
companies will pay off your high interest debt directly. This will help keep you from spending the
consolidation money a different way.
You can also save a lot on your cell phone by shopping for a different plan. Ask about any discounts from
your work. Many cell phone providers offer senior, veteran, AAA and employer discounts. You may be
surprised how much you can save just by calling your cell phone provider and asking about current
promotions for existing customers.
Check out the Better Business Bureau to locate reputable debt management companies. It is wide to do
business with a company who is Accredited and has a A- to an A+ rating. Ratings of a B+ or lower may
indicate concerns with the company.
Make sure that your contract is in writing. If any company does not provide you a clear contract, then
you should go elsewhere.
Is debt consolidation going to be affordable to you? While the payment may be lower and the timeline
shorter, you may not be able to afford it. Think carefully about whether this is the right solution for you.
If you cannot qualify for a debt consolidation loan, credit counseling may be a good option. If you cannot
afford a credit counseling plan or wish to get out of debt faster, then debt negotiation plan may be your
There are many options for getting out of debt but perhaps only one option that is right choice for your
situation. If you want to pursue debt consolidation, use the information here to make a wise decision.
One of these options may make it possible for many people to experience financial peace and get on the
path to investing in their future.