1. Debt consolidation is a term that is used a lot for a
wide range of financial plans to help people manage
overwhelming debt. But in truth, these plans can be
quite different with different consequences. Pure debt
consolidation is a great solution for many people facing
large debt, but they need to understand what debt
consolidation is and is not.
debt consolidation loans

2. If you're in debt, you may find that one of your problems right now is not
so much lack of information as it is too much information! There are tons
of sites online offering all kinds of debt solutions Many of them call
themselves debt consolidation, but that term is used so loosely it sounds
like it could mean almost anything Maybe you don't care about
terminology After all, a debt plan that works is all that matters, right? The
fact is that you need to know all about these things in order to choose the
right option for your situation Picking the wrong one can cost you money
(the last thing you need right now), hurt your credit, and keep you stuck in
debt Picking the right one can get you out of debt Let's start with the one
not on the list: bankruptcy Believe it or not, Americans have a
Constitutional right to go bankrupt Bankruptcy is a legal proceeding

3. You can't declare bankruptcy in the U S without getting a lawyer and
judge involved The proceeding becomes part of public record
Bankruptcy is extremely intrusive in that outsiders will now determine how
your money will be divided up to pay off debt and what you must sell
Bankruptcy offers an advantage many debtors really love A court has the
power to issue "bankruptcy protection " You may be allowed to write off
certain debts That means some debts just go away; you are no longer
obligated to pay them

4. Furthermore, once you have "bankruptcy protection," bill collectors can
no longer pursue you for those debts The problem with bankruptcy is
that it all but ruins your credit It stays on your credit report for seven
years, and it has a way of cropping up even after that It makes it very
tough to get new loans or buy a house The loans you will be able to get
will be at very high rates of interest because you've suddenly become a
high-risk borrower Bankruptcy will turn your life upside down If you have
secured loans (like car notes or loans to buy electronic equipment), those
things can be repossessed The court may seize or order you to sell
certain assets and take the money to pay off other debts Another
requirement is attending money management classes, kind of like being
forced to go to debtors' rehab

5. debt consolidation loans While bankruptcy does have its place, it is
definitely the "last resort " Debt settlement and debt negotiation mean
roughly the same thing: you or somebody representing you sits down and
talks to your creditors to work out a solution The principle is that you
work out (negotiate) a way to end (settle) your debt You may be able to
get the interest rate reduced or the terms of payment changed (such as
getting a couple of months off or extending the terms of the loan)
Sometimes you negotiate to try to get the balance reduced As an
example, assume you owe $10,000 You would negotiate with your
creditor to try to get him to accept less, say $5,000, and mark the debt
paid in full Why would anyone do that? The main reason a creditor will
negotiate a debt is that they suspect you are flirting with bankruptcy and
they are fearful that if you go bankrupt, they won't get anything From
their viewpoint, $5,000 may be better than nothing

6. Debt settlement and negotiation plans will almost assuredly make it all
but impossible to get future loans at reasonable interest (if at all) A debt
management plan (DMP) is a formal plan where you hand your problem
off to a company which then negotiates your debt You make one monthly
payment to the DMP and they handle your problem While there are
legitimate DMP programs out there, these are very treacherous waters
Do your homework and check with the Better Business Bureau as well as
a certified credit counselor (nfcc org) and maybe your bank or credit
union There are programs out there that are outright frauds and a few
that are not dishonest but not exactly advantageous to the customer The
last approach is something called debt consolidation Ironically, many
debt settlement, debt management plans, and debt negotiation
companies will call their programs "debt consolidation

7. " That is not inaccurate, but it's a bit misleading Debt consolidation
simply means lumping all your debts together In one way, that is what all
debt plans do at first, whether it's bankruptcy, a DMP, or some other
program But pure debt consolidation involves lumping your debts
together and then taking out one big loan to pay them off Why would
anyone do that? If you have a lot of high-interest loans, you may be able
to take out lower-interest loans to pay them off For instance, if you owe
$10,000 at 22% on a credit card and you can borrow $10,000 at 10%
from your bank, you would be smart to borrow $10,000 at 10% and pay
off the credit card You still owe $10,000, but you owe it at less than half
the interest rate If you keep making the same payments, you'll pay the
debt off much sooner

8. If you own a house and can refinance it or get a home equity loan or
second mortgage, you can use that to consolidate your debt Let's say all
of your debts together came to $100,000 and you owed them at varying
interest rates from 22% down to 10% If you own a house and take out a
second mortgage (or use another refinancing option), you can borrow
$100,000 and pay off all of your debt You can structure this second
mortgage as a 30-year loan and probably get it at 7% or even lower The
result is a significantly lowered monthly payment and a boatload of
individual loans you can stamp "paid in full" Debt consolidation offers a
lot of advantages (That's why so many programs like to call themselves
debt consolidation!) It is the only debt solution that can actually help your
credit score (your credit score goes up whenever you pay off loans in full)
If you are willing to take the time to learn a few things, you can do it
yourself (no fees or other people to pay)

9. It's not intrusive; in fact, if done properly, no one would ever guess you
did it Even if your bank or a lender figured it outthey would probably
think you're smart to handle your debt that way If you can figure out how
to do a pure debt consolidation on your own, you don't need to bother
with hiring a company (or a lawyer), entering financial rehab, or paying off
agents to "manage" your money In the interest of fair disclosure,
however, it must be stated that debt consolidation in its pure form will not
work for everyone Some people will not qualify for it There are others
who might indeed qualify for debt consolidation, but will find another plan
is more to their advantage It's important to learn what you can to find out
if debt consolidation is right for you

10. debt consolidation loans