Debt Consolidation: How it Works

As long as consumerism flourishes most of us will be tempted to overspend thus creating a financial bind. While some people do manage to get themselves out of debt others, for a number of reasons, including job loss, divorce or hospitalization cannot. In these instances bankruptcy may seem the only way out, but for homeowners there are other options. Debt consolidation is one such option.

How does debt consolidation work?

Homeowners may apply for home equity loans that can be used to pay down debts. Your credit union is the best place to turn if you are considering such a loan. Depending on the strength of your credit and other things such as the current value of your home your credit union will give you a lump sum that you can then use to repay your creditors. With most of your debts now paid you will make one payment, usually at significant monthly savings, to the credit union.

If you choose to use a home equity loan to repay your debts be sure that you are ready to make significant changes to your lifestyle, spending and saving habits. Your loan is secured by your home and you risk foreclosure if you default on your loan payments.

It is a good idea to make a budget and have a plan for how the loan will be repaid. If you run into trouble you must maintain contact with your lender so that you can make arrangements that are acceptable for all parties concerned.

Even if you are not a homeowner there are options Consider contacting a reputable debt help agency. These companies will contact all of your open accounts and negotiate a payment plan with lower interest or a lower balance. Once this happens, they will collect the payment from you and pay off that bill, and then move to the next one, doing the same thing with all of the open accounts. They accept the payments on the accounts, with their fees added onto the payment. When research debt help agencies be sure to choose a reputable agency and read the contract in its entirety. Many debt help agencies are unscrupulous and charge exorbitant fees that serve only to escalate your debt load. A good service can help lower monthly payments, lower interest rates, and can help in avoiding accounts being turned over to collection companies. How does this look on a credit report?

The consolidation plan will show up on your credit report, but most companies consider voluntary enrollment in a debt consolidation more favorably than non payment or bankruptcy. With time negative reports will have less impact on your score.

Before you sign on for a debt consolidation plan be sure that you can manage the payments. Take the time to review all expenses and sources of income before you commit to a monthly payment amount. If you do not follow through with the plan to repay your bills your creditors will not keep any reduced interest arrangements and will be less likely to work with you on any future arrangements. Additionally, the accounts will go back into collection, and the debt consolidation company may attempt to collect unpaid fees.

Nicole Soltau is the President and Founder of http://CreditUnionRate.com - The Leading Credit Union Directory Search, Find, Join.

---

Credit Counseling ? Six Tips to Avoid Counseling Scams

Credit counseling is a useful service for anyone with problem... Read More

Debt Consolidation Confusion

Learning about debt consolidation can be quite a confusing venture... Read More

Debt Consolidation: Reduce Your Monthly Debt Payments Now

Debt consolidation is frequently becoming a very familiar term used... Read More

Reducing Credit Card Debt

One of the easiest "things" that can happen in life... Read More

Moving Debt Between Cards Can Save You Money

If you're like most people, you have plenty of credit... Read More

Is There Something Called a Bad Credit Credit Card?

Is there something out there called a bad credit credit... Read More

Reducing Debt Through Lower Interest Loans

It happens to the majority of us, credit card debt... Read More

Before Considering Debt Consolidation

If you believe in the good in people then you... Read More

Money Problems?

You're not alone. Many people face a financial crisis some... Read More

Debt Consolidation Solution

Debt Consolidation is a solution that solves your debts. Debt... Read More

Thinking Beyond Debt Consolidation Loans

Planning to devise a permanent solution to the problems of... Read More

Are You Buried In Debt?

Are you having a problem paying your bills? Are you... Read More

How To Get Rid Of Debt Problems Step 3 -- How To Negotiate Reduced Payments With Creditors

First, make a list of your creditors (NOTE: you should... Read More

Debt Consolidation Service In Birmingham

Jane was a fun loving girl from Birmingham, you could... Read More

Debt Consolidation ? Be Careful When Trading in Your Car

The automobile has long been recognized as the classic American... Read More

Does Working With a Credit Counseling Organization Hurt Your Credit Score?

Credit counseling organizations do not lower your credit score when... Read More

Online Debt Consolidation ? Devising Newer Ways for Changing Consumer Trends

Consumers today are getting wiser by the day. They are... Read More

Get Out of Debt

It is said that a pet tiger cub can become... Read More

How Do I Know a Good Credit Card Debt Reduction Strategy When I See It?

Credit card debt reduction is an important part of the... Read More

How to Choose a Debt Consolidation Loan?

If you have decided that a debt consolidation loan is... Read More

Debt Consolidation: Friend or Foe?

Debt consolidation has become big business in this country over... Read More

Private Student Loans ? Dispelling The Myths

Private Student Loans ? dispelling the mythsIf savings, grants, scholarships,... Read More

What is the Difference Between Unsecured and Secured Debt?

A secured debt is a debt in which the creditor... Read More

Debt Consolidation

Sometimes life can get on top of you and out... Read More

Financial Aid - When Should I Apply For?

Many different types of financial aid are available to you... Read More

Debt and New Spirituality

Overcoming the stigma of being in dept, grow in self-confidence... Read More

What Is A Debt Consolidation Program?

Debt consolidation programs are devised to get you out of... Read More

Debt Consolidation Refinance Loans - A Great Way To Lower Your Bills

For millions of homeowners, refinancing is the perfect way to... Read More

Consolidate Debt to Help Get You Out of the Quagmire

Will you agree with me if I tell you that,... Read More

Consolidate All Your Debt Into One Monthly Payment

Are you feeling overburdened with debt? Are you paying out... Read More

Credit Card Purgatory - A 7 Step Comprehensive Plan to Get and Stay out of Credit Card Hell

Does this Sound like You? There are 100 shopping Days... Read More

Going Debt Consolidation Way!

We are aware of the fact that it is easy... Read More

Debt consolidation ? More Options for Reducing Credit Card Costs

Borrowing money against your credit cards has always been among... Read More