Millions of people in the nation are in debt, and the numbers are growing rapidly. The most common causes of overwhelming debt are job loss, disability, divorce, gambling, underemployment and poor money management. Many debtors cling to bankruptcy when they find that they are having debt issues. Bankruptcy should be a last resort, however. Debt consolidation is an option that many consumers overlook. It can provide just the right financial balance for some consumers to get right back on track. The following is some information about debt consolidation.
What Is Debt Consolidation?
The term “debt consolidation refers to a process during which a consumer merges all of his or her existing debt into one account. The person can perform that task using a number of strategies.
Benefits of a Debt Consolidation
A debt consolidation has many benefits to it. One of the main benefits is that it organizes debt so that the debtor does not forget to pay what he or she owes. The debtor also can save money if the interest rate on the consolidation is lower than the scattered interest rates on the existing debt.
Who Qualifies for Debt Consolidation?
Anyone can qualify for a debt consolidation. The type of consolidation may vary from person to person. There are generally three ways that one can complete the process of merging debt. Those processes do have requirements. Fortunately, debt consolidation is available in some form to every consumer whether that person has glowing and excellent credit or very bad credit. A financial advisor can help a consumer to decide which process will work best for him or her. Alternatively, the consumer can review the options in this text and then choose the route that seems best in his or her world.
Types of Debt Consolidation
A consumer can try three types of debt consolidation to resolve any issues that may be apparent. The first type of consolidation that the person can try is a consolidation loan. A consolidation loan covers all existing debt, has a low APR and is available to consumers who still have salvageable credit. This type of loan is definitely available to those who have good or excellent credit. Some consumers with fair credit may be eligible to receive assistance, as well. A curious consumer can complete an application and receive an answer.
The second type of consolidation that one can conduct is a high-limit credit card consolidation. The consumer takes all of his existing debt and transfers it to a high-limit credit card using a balance transfer. The person who applies for the high-limit credit card must have good credit. This type of consolidation is the most difficult type to get, but it is also the most beneficial because of the revolving credit. Consumers can transfer their debt during the application process for a high-limit balance transfer card. One amazing benefit that consumers get from using this process is the big savings on the interest rates. A high-limit credit card may have a promotional term where the consumer does not have to pay an APR.
A third way that a consumer can conduct a consolidation is by signing up for a debt management program. A DPM is like a third party arrangement where the counselor negotiates with the creditor to get all his or her debt down and then collects a lump sum from the consumer each month. The counselor then makes sure that all the consumer’s debts get paid on a monthly basis. Anyone can sign up for a debt management program because no lending is involved in its processes.
Which Consolidation Do You Need?
Each consumer must decide which debt consolidation option is best in his or her world. People who are in the worst condition would probably be best with a DMP. Consumers who are in good standing should perhaps try the credit card consolidation for all of the benefits it has to offer.
How to Start a Debt Consolidation
Interested persons can start the process of consolidating debt by contacting the organization that is in charge. The person should have a list of debtors on hand as well as some pay stubs or tax returns to show income.