Being in debt is not fun. Most of the time we don?t realize how deep in debt we are until the creditors start calling everyday insisting that we make full payment at the soonest possible. When the creditors come knocking, we often go into a state of panic as we do not have the faintest idea on how to quickly pay off the creditors without causing a huge dent in our financial situation. We rationalize that the only way to at least address the problem is to see the creditors or their representatives personally to discuss on the best way to solve the issue. But on the other hand, we do not have the experience or the expertise to negotiate with creditors so meeting them would feel so much like being put in the line of fire.
Before you even think of picking up the phone to set up an appointment with your creditors, you might want to do your homework on the various solutions available for you to settle your debts. One of the most widely known solutions to paying off debts is debt consolidation. Basically you will be taking a loan to pay off your existing debts. Now before you get too excited, you should weigh the pros and cons of taking on another loan. After all, the goal here is to be debt free for the rest of your life, not to replace your existing ones with another.
There is no one debt consolidation formula that suits all sorts of financial problems. So you really have to familiarize yourself with several options of taking on new loans to pay your existing debts. It is always advisable for you to get advice from financial consultants so you won?t be making decisions too blindly. Some companies offer free advice so you can utilize their knowledge for you to make an informed decision.
One of the questions you probably would want to ask is ?How do I consolidate my debt?? You need to consider the best possible option to keep your debts manageable even after consolidation. If you engage a third party to handle this issue for you, usually for a certain fee, your appointed credit consultant will play the part of negotiator and set a meeting with your creditors to discuss the best possible option to reduce your debts. If your creditors agree to your debt settlement offer, your credit consultant will then restructure your monthly payment requirement. In some cases, your creditor might insist for you to pay the lump sum of your agreed reduced debt.
This is usually when your credit consultant would probably advise you to take on a loan to pay your creditors. Check out banks that offer lower interest rates so you won?t face bigger problems in paying them back. However, bank loans are not your only option so be sure to explore all other possibilities such as ?cash-out? refinancing, refinancing your car or even taking out a home equity loan.
If you have more than just one creditor to pay, your appointed credit consultant will negotiate with all of them until they agree to reduce your debt as much as possible. Your consultant will then restructure your debts and combine them all into one single entity. This way, you will not have to apply several different loans to pay off each of your creditors. You just have to apply for one loan sufficient to cover all your debts with various creditors. By paying off this one loan, your consultant will then distribute the payments to respective creditors according to the agreed monthly amount on your behalf. You must remember that this does not mean you are totally off the hook because you have to consistently pay off your consolidation loan. Low interests are still interests and once they accumulate they will amount to a bigger number; perhaps bigger than the root amount of your loan if you are not careful.
When you?ve gone through the entire process, you need to conduct your own review. Look back and question yourself ?Did I successfully consolidate my debt or did I end up stepping into another financial disaster?? Check with your appointed consultant often to ensure that your debts are being paid off as planned and that you are disciplined enough to follow through with what was planned and agreed by you and your consultant.
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Article Added on Tuesday, February 28, 2012
Source: http://www.bharatbhasha.net/finance-and-business.php/347964
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