We often hear the words, debt consolidation, but what does it mean? Debt consolidation is a debt management plan. You may choose to create your own plan for paying off your debt, or choose to use a third party, such as a non-profit credit counseling organization.
Here are some important tips and information truths and myths that will help you decide which management plan best suits your needs:
HOW DO YOU KNOW DEBT CONSOLIDATION IS FOR YOU?
If you have most of your balances in credit or charge cards, personal loans and collection accounts then this may be a wise choice to pursue. These types of debts are called unsecured debts. If the balances you have for example are in old violation or parking tickets, tax debts or child support/alimony arrearages, then debt consolidation plans will not help.
Before you choose debt consolidation, review your debts carefully. You may only need counseling. With the Loan Star Team we can help you make your own plan to pay off your debt. Homeowners may consider refinancing as an option to reduce high interest rate loans.
TRUTH: DEBT CONSOLIDATION IS NOT BANKRUPTCY.
These terms can cause confusion. Debts will always be debts until all are paid in full. Bankruptcy is a discharge or settlement for debts. While debt consolidation payment plans seem like a solution, your credit report will be affected. If a payment plan to pay off your credit card is lower than what you normally pay each month, it may show creditors that you have trouble paying your bills.
TRUTH: DEBT CONSOLIDATION CAN WORK BECAUSE IT IS SIMPLE AND STEADY.
For those that need the discipline of a never changing monthly payment, then debt consolidation is the answer. You payment will be the same each month to each of your creditors until all your debts are paid in full. You will never need to worry about how much to pay-it is just that simple. One thing to remember…as your monthly payment is lowered, it will expand the time it will take to pay off your debts.
MYTH: YOU CAN CONTINUE TO CHARGE.
When you choose debt consolidation, you will need to be charge-free until all the debts are paid. This is a true adjustment for most accustomed to using lots of plastic.
TRUTH: YOU CAN DO THIS ON YOUR OWN.
At first, it may seem difficult, but you can do it. It is not easy to change your habits, but determination will work in your favor, financially and mentally. Ask your creditors for a reduction in rates, stop the frequent charging, revisit your budget and see exactly how much you can afford to spend. Make all efforts to be diligent in saving and making payments on time. Your credit report will be affected positively and you will be more confident in securing a loan for your home needs.
Get advice from the professionals before considering debt consolidation with agencies. The Loan Star Team is at your doorstep to provide this guidance and counseling. With the lowest interest rates of all times, consider refinancing to a lower mortgage rate and pay off your debt faster!
We provide you with professional help for your refinancing and future home loan needs. Call us at 770-888-2232 (Gary), 770-842-3480 (Jeff) or email us at firstname.lastname@example.org or email@example.com to get started!
Gary Welch and Jeff Morris are Atlanta mortgage bankers who are able to help you choose a mortgage solution that combines the right down payment, monthly payment and tax benefit for your needs. More information pertaining to industry related news can be found on our blog at loanstarteam.com/blog.