Times are hard in the U.S and most household owners are finding themselves deeper in debt. According to the Federal Reserve statistics the average household carries $15,675 in credit card debt. When you consider auto, student and mortgage loans the amount comes to $132, 158 in total debt. Analysts say the situation is going to get worse as the global economy reels under uncertainties.
If you are repaying several loans you appreciate how frustrating this can be. You always have a cloud hanging over your head when repayments are due. It is no wonder then that many household owners default as they can’t manage their budget. It is important to look for a financial solution that gives you some relief and helps you start rebuilding your finances.
Debt Consolidation in Detail
Experts have hailed debt consolidation as a great financial option for households and even students struggling to repay smaller debts at the same time. This is a financial arrangement where you get a new unsecured loan from a debt consolidation company to repay all the smaller loans. You will then be left with one single monthly repayment which is easier to handle.
This option has increased in popularity over the years as more providers come forward to offer this service. Household owners have also access to financial information and they can make more informed decisions about their finances.
Advantages of Debt Consolidation
Before consolidation your loan it is important to understand how this will help your finances. Here are some of the main benefits of consolidating loans:
- Lower interest rate repayments: The new loan will come with lower monthly repayment which means your finances will improve with time. When multiple repayments are consolidated into one interest repayments are easier for you to manage.
- Peace of mind: Research shows most people are being driven to early death by stress. Most of the stress triggers are financial and if you have multiple debts to repay at the same time this can push you to the wall. One repayment is easier to handle and you don’t have to worry about call from multiple creditors.
- Better financial management: It is easier to prepare a budget and stick to it when you only have one single monthly repayment. Multiple debts are more likely to lead to default which makes it important to consolidate your loans.
- Improved credit record: When you have a single repayment it is harder to default and you don’t have to worry about multiple creditors. Your credit score will improve with time as you continue making prompt monthly repayments.
Finding a Debt Consolidation Company
In essence, debt consolidation makes your life easier and it is an easier option to get your finances back in shape. To enjoy the benefits of debt consolidation you have to identify eh right company. Here are some ideas to guide you:
- Registration
An established debt consolidation firm should be registered with the National Foundation of Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies. These associations regulate the industry and ensure clients receive professional companies. A registered company will avoid underhand techniques as they risk blacklisting.
- Check with BBB
A reliable loan consolidation company should be accredited by the Better Business Bureau (BBB). The company should also be rated as this gives you an impression of how well the company has been serving clients. If they have multiple complaints against them keep looking.
- Online Reviews
Visit online reviews for debt consolidation and you will find a lot of invaluable information about the conduct of different businesses. Most customers will review and rate a company they have worked with and this information is crucial to help you make an informed decision.
- Services Provided
If you contact a company for debt consolidation make sure you are receiving this service. Some companies tout other easy methods of consolidation yet these are not what you are looking for. You need to appreciate that debt consolidation is not the same as debt management or settlement. It doesn’t involve negotiation for lowering of internet rates. In simple terms the loan provider buys all your debt and you will be repaying one single payment for the new single loan.
- State Licensing
Some states require debt consolidation and debt relief companies to have state licensing. This is an important requirement because it allows you to sue the company if they don’t adhere by the terms of your agreement. You are also assured of more professional services from a licensed company because they are regulated.
- Customer Support
A company offering financial services should have the best customer support team. This ensures all your queries are answered in time. The company should also have convenient channels of communication to ensure clients are able to follow up on their repayments. Try contacting the company to assess how quick they are to respond to your queries.
- Trust and Integrity
Confirm from other clients about the reliability of the debt consolidation company before you use their services. Always work with a company that is straightforward in its dealings to avoid disagreements in future. The company should also be forthright about the loan charges as contained in the contract.
- Avoid Scams at All Costs
If a company calls you out of the blues just ignore the call because you are about to get scammed. If a company is aggressive or pushy while trying to sell you a loan you need to avoid it because this is unethical. It is also important to confirm whether the company is actually offering debt consolidation or other debt management solutions.
Before going for debt consolidation do the math; are there any upfront fees? How is the loan term going to change? What about the interest rates? Are they going to fall? These considerations will help you get the most out of debt consolidation. You can talk to your financial advisor to discuss different packages in the market before choosing the one that dovetails with your financial needs.