What Are The Available Debt Consolidation Options?

At times, you might find yourself in a financial quagmire where you are not only dealing with debt, but also multiple creditors. Under such circumstances, you must keep track of too many accounts and you get a pile of bills in your mail every month. If you fail to remit your payments on time, you have to deal with a barrage of phone messages from the creditors. If you are in such a situation, then debt consolidation is a viable option that will help greatly in minimizing your stress. There are two debt consolidation options available to choose from as will be discussed below.

Taking a debt consolidation loan

Using this approach, a financial institution will offer you a single loan that will pay off all the debts owed to the several creditors once. You will only have one outstanding loan with the financial institution, making it easier to remit you monthly repayments. Apart from streamlining your debt into one single entity, a consolidating loan usually attracts a lower interest rate compared to the different ones charged by each of your previous creditors. For example, some debts, such as those relating credit cards or retail store cards usually attract high interest rates payable every month. In such a case, it is better to consolidate such debts because the loan from the bank will definitely have lower interest rates. One thing you ought to remember is that you must have an acceptable credit rating to qualify for a consolidation loan. Also, you must have a substantial income to cover the single monthly repayment the financial institution requires you to make.

Debt settlement

If you have accrued too many loans and cannot afford the monthly repayments, then you should consider debt settlement as an option. However, it is important to remember that this option is eligible for unsecured loans, such as those relating to credit cards. You will approach a debt settlement company and ask them to negotiate with your creditors to settle for a certain amount of money that is paid in a lump sum. If the creditors agree to this plan, they will be accepting to get a partial payment of the money owed to them. By signing this settlement, the debt is fully settled although the amount is lower than the actual debt. In most cases, creditors agree to this option after the customer has defaulted to remit repayments for several months because they view it as the fastest and easiest way to recover a bad debt.

Before embarking on any of the two debt consolidation approaches discussed above, reach out to a debt arbitration firm, like Financial Guidance Center. These companies have qualified personnel who will look at your personal finances and advise you on the best way forward. They also understand the dynamics of the current economic market and will come up with a solution that suits your financial needs.