Get Out Of Debt

If you feel like you’re in over your head with debt, you might be considering a credit debt consolidation loan. You’ve no doubt read and seen the advertisements that promise to erase debt in a matter of days, or cut your payments by 50%.

These ads are very tempting to act on, after all, you’ve got a ton of credit debt, and you might feel like you’ll never be able to pay all that debt off. If you’re thinking that a loan might be the answer, you could be right – but read this credit debt consolidation advice first.

Millions have found themselves in the same position that you are in – too many bills and not enough money to go around to pay them all. It becomes a vicious cycle as you make your payments later and later, and your creditors begin to nag you relentlessly.

Here are the things that you must know and consider before you decide to use credit debt consolidation as your answer:

1.) No matter what you do to get out of your current debt mess, you have to commit yourself to not getting back into the same mess again. That means that you must learn to manage your money and your debt responsibly or you will end up in the same position in a few years.

While you are working to get out of your current debt situation, learn what it takes to really get control of your finances. Find out what it means to live within your means. Learn to change your mindset so that you are not spending irresponsibly. And learn to save.

2.) When choosing your debt consolidation method and company, be very careful. There are excellent debt consolidation companies out there, with great reputations, and there are some that are rather shady.

Before you commit to any debt consolidation company and program, be absolutely sure you’ve done your research. You can do online searches for the organizations you’re considering and find plenty of information on them.

3.) Take advantage of any free services your debt consolidation company offers you, such as money management tools, financial advice, savings calculators and other forms of help. These tools will be instrumental in your financial recovery.

4.) Consider getting a home equity loan for credit debt consolidation. If your credit is good and you’ve got some equity in your home, you may be able to get a home equity loan at a reasonable interest rate, one that is lower than your credit debts, and pay your debt off that way.

5.) Most importantly, don’t stick your head in the sand. If you are overwhelmed by credit debt, then you need to look for help. A credit debt consolidation loan may be the best way to get that help.

Trying to figure out how to handle a lot of debt can be a daunting task. You might feel overwhelmed and you may want to run and hide. Don’t do it! Instead, research your options, which may very well include credit debt consolidation.

Upon reviewing the different options at your disposal today, it should be quite evident which direction you should go as a consumer. The conventional wisdom tells us that all debts are created differently, so it will take a solution that is designed to your situation. Some people benefit from debt consolidation and the nice organization that it brings. These people need structure and they just need a new way to look at their current debt. Other people can get by with settlement, because they qualify and they have the resources to make it work. Reviewing the two should show you which one is a better choice for you.

Settlement and the amazing disappearing debt

If you want to see something of a magic trick, then utilize debt settlement. If you have never seen a debt disappear, then you owe it to yourself to start now. Debt settlement requires some things out of the consumer, though. First of all, you have to have either negotiation skills or a solid settlement firm to help with the negotiations. Likewise, you are going to need a lump sum up front in order to settle. If you don’t have that, then your options are to save up and get the lump sum or go another direction. Settlement can save you as much as 65% or 70% on your debt, though.

Consolidation and the counseling program

Debt consolidation might just be a new loan to some people, but it does not really come alone. For most good consolidation companies, it comes alongside a program that is designed to help you get ahead. These programs involve a type of credit counseling where you look at your debt with a person who is skilled in that regard. That person will help you come up with a way to avoid problems in the future. The more important item here is the cut in interest that you will receive as a result of this loan type. It can save you thousands of dollars over the long haul and consolidation requires no lump sum, either.

These two options are different, but equally effective in their own way. The debt relief world is nice because it has something to offer to everyone and this is an example of that. If you use each of these methods in their intended way, then good things can happen for your credit report and your debt ledger.

I have written in the past about programs that do not tell consumers the truth, hiding every little detail possible in order to cash in on retainer and monthly maintenance fees. First and foremost avoid most agencies with these unnecessary charges unless they come highly recommended from a reputable source.

What is the truth? Many of us do not want to hear our interest percentage rates will rise, late fees and penalties will continue to accumulate, etc.. when we stop making our monthly payments to our creditors, and there is no one that can make them go away except for consolidation programs that will negotiate to lower interest rates. When consolidating all payments must be made on time otherwise we will be dropped from the program. In order to consolidate debt we must be current on all payments. Settlement programs can not stop these charges at all, and that is the truth.

So now we now if we consolidate we will be paying everything we owe back to our creditors plus interest. What most consolidation companies fail to tell consumers is that for as long as they are in the consolidation program their credit report will look as if they have filed for chapter 13 bankruptcy. This little detail is often not told by credit counselors. If credit score is important any type of debt relief program must be avoided.

The same goes for settlement programs, credit score will be affected as well. The only difference is the person’s credit report will not show a chapter 13 mark. The accounts will be reported as delinquent until settled or payed in full. Again, if credit score is important debt settlement is not the route to go either.

Are there any tax implications on debt settlements? YES. On any savings over $600.00 on any particular settlement a person will receive a 1099 statement and any money saved over $600.00 will have to be claimed as income unless the persons losses for one year are greater than the gains. Meaning if when tax time rolls around a person shows a negative margin on their earnings, for more information on this matter we should consult a licensed tax broker.

Can we be sued, have wages garnished, property attached to? YES. Any creditor has the right to the assert legal action to claim money owed. When we sign our contract agreement we give the credit company or companies the right to do so. If any debt relief agency tells anyone none of the above can happen, they are lying. Some individuals are very lucky, and never even get a phone call from a creditor or a collection agency and have the statue of limitations expire on their debt. I believe everyone must be aware of these possibilities before pursuing settlements on their debt.

So far we know of the fees that will be accumulated on our debt if we discontinue our payments to our creditors, what will happen to our credit reports and scores, the tax implications of debt settlements, the legal implications. Do we really need someone not telling us all this? If I were looking for debt relief help more specifically debt settlement I would like to hear all these little nasty details before deciding to negotiate on my debt. I would be able to sleep better at night knowing the consequences that may or may not happen.

Debt negotiation has yielded great savings to many, especially if they are well informed and the debt relief agency they choose to work with is honest and up front. Even with some of these difficulties waiting to happen some of us have no other choice but to seek debt relief, BE SMART and ask questions, if the answers you are getting do not satisfy you, keep searching. The right debt relief agency is out there for you, just look hard enough and you will find it.

What is a government debt consolidation loan?

This is a kind of are loan that is made available (usually through the Federal government) to pay off multiple loans that you may have. By borrowing a sum of money from the government, you can pay back multiple creditors. This allows you the relative luxury of having one single monthly payment compared to three or four (or more). Debt consolidation also helps you by offering a lower the interest rate. This is done by converting the debt from unsecured to secured, e.g., using your home for collateral.

What are my options for a government backed debt consolidation loan?

The most readily available government loans are for students. Many students (and also recent graduates) have multiple student loans, credit card debt, and medical bills. The US Department of Education offers debt consolidation loans for the purpose of paying off federal education loans. Then they will issue the student a new loan for the amount of the old loans.

What should I look for?

The Higher Education Act (HEA) mandates a loan consolidation program under the Federal Family Education Loan (FFEL) Programs and the Direct Loan Program. This means that you have an opportunity to pay off your multiple student loans by getting a new loan.

What sorts of benefits does this give me?

Your loans may all have different terms and repayment schedules; also, they may have been issued by different lenders. By consolidating your debts, this simplifies your loan repayment by paying back several types of Federal education loans into one new loan. Also, the interest rate may be lower than on one or more of the underlying loans.

Not only that: the amount you pay every month on a loan is often going to be lower and the amount of time to repay may be stretched out as well, compared to the original loan. All in all, this means that you will have a debt that is more manageable and make it more likely that you can pay it back in time.

How can I get a debt consolidation loan like this?

To get a Direct Consolidation loan, you have to already have at least one Direct Loan or Federal Family Education Loan (FFEL) Program loan. In addition, that loan must be in a “grace period,” or have been granted a deferment, or default status. If your loan does not fit that profile, it can’t be included in a Direct Consolidation Loan. Contact Federal Student Aid at the US Department of Education for more details.