Many people in North Las Vegas struggle to deal with the amount of debt they have. Maybe they acquired their debt as an investment in their future, as with student loans or mortgages. Maybe they took on debt to deal with a family emergency, such as a sudden medical disaster. Or, maybe they just developed irresponsible spending habits, ran up a bunch of credit cards, and found themselves in over their heads quickly.
Whatever the reason, these individuals and their families have two options. (1) They can continue to struggle with their debts, making minimum payments when they can, but otherwise treating their debts as impossible-to-deal-with burdens. Or, (2) they can toughen up, get smart, and devise a solution for dealing with their debt over the long haul.
Neither of these approaches is easy, but only the latter is going to change your circumstances when it comes to your debt.
You have many options when facing up to your debt. You might be able to make a real change simply by taking stock of what you owe, devising a realistic personal budget, sticking to it with discipline, and diverting any extra funds to paying down your debt. You could also enlist the help of a debt professional, such as a credit counselor, who can work with you to figure out exactly how you got into your financial predicament, and how to get out of it.
For many individuals, the best option is debt consolidation. It’s not a one-size-fits-all solution, but debt consolidation can make a difference in the life of a person who owes numerous debts to different creditors and needs help making them more affordable and easy to manage.
If that sounds like you, read on.
First, what exactly is debt consolidation?
Debt consolidation is a broad umbrella term for a diverse array of strategies that share a single goal: consolidate as much of your debt as possible into a single payment that makes paying off your debts more manageable, while eliminating them sooner.
One form of debt consolidation involves using credit cards to transfer all of your balances into a single card, ideally one with a low or 0% introductory APR. This balance transfer method works by halting the compounding of interest on your debt for a limited time, allowing you to make more headway towards paying down your debt. Ideally, you won’t use the new credit card at all. You’ll just make and follow a plan to pay your debt off before it starts accruing interest again.
Balance transfer can work for individuals who have good enough credit to qualify for a new credit card, as well as a small enough amount of debt that they could conceivably transfer it (or at least a sizeable amount of it) to a new card with a 0% introductory APR. They then need to have enough financial flexibility and discipline that they don’t use the new card to run up new debt.
Another form of debt consolidation in North Las Vegas involves working with a reputable company that can help you negotiate down and even eliminate your debts. Reputable is the key word here. There are, unfortunately, many companies out there preying on vulnerable individuals who are deeply in debt, making outlandish promises and taking money in the form of a large upfront fee. Beware of companies that promise you the world, make impossible guarantees, and then demand a lump sum of money before doing any work.
Reputable debt consolidation companies, on the other hand, can help you pay off your debt and get your spending habits in order, the right way. These companies often ask you to pay into a savings account over a period, instead of paying your minimum payments to your creditors. They’ll also often require that you close all of your credit accounts during the payment period to prevent you from running up any more debt. At the end of that period, they’re able to use the money in that savings account to negotiate with your creditors, asking them to take a lesser lump sum instead of continuing to harass you for the full amount of your debt, which they probably realize they will never receive anyway. You’d be surprised how many creditors are willing to take that offer, but it makes sense. It’s certain money now over unlikely money later, and they get it without having to harass you.
Lastly, many people seek debt consolidation in the form of a personal loan. They take out a loan equivalent to the total amount of debt they owe and pay off all of their debt in one fell swoop. Then, instead of having to deal with a ton of different payments and payment deadlines, as well as potentially high interest rates, they just have to worry about one payment for one loan.
Each of these debt consolidation methods has a place, depending on your situation.
So, how do you get a debt consolidation loan?
How to get a debt consolidation loan
First, figure out exactly how much you’ll need in a loan.
Collect all of those annoying debt statements that you get each month and put them together. Open up a spreadsheet on your computer. Then, record what you owe, whom you owe it to, and what the interest rate is for each, as well as any other relevant information, such as payment dates.
Add up the total balance. It’s probably a big number if you’ve found yourself reading this article. However, don’t let it intimidate you. Divide it by 36. You’ll need to pay that amount each month for three years to get out of debt.
Can you afford it? Be realistic about your finances and your ability to stick to a budget. If the answer is yes, then you likely don’t need a debt consolidation loan at all; you just need to buckle down.
If you can’t afford it, though, then it’s time to weigh your debt consolidation options. There are a few different types of loans available.
Unsecured Loans
With unsecured loans, you’re borrowing money on credit from a lender, likely a bank or credit union. It likely goes without saying, then; to get an unsecured loan, you need decent credit.
Unsecured loans are attractive for many people in debt because they’re not tied to any particular material asset, just your credit. Because of this, they are often a less risky option for those in search of debt consolidation.
That said; if you don’t have good enough credit, then an unsecured loan might not be an option.
Secured Loans
With secured loans, you’re borrowing money against a sizable material asset that you already have. That could be your home, your car, your savings account, or some other form of collateral.
The advantages of a secured loan come from the presence of this collateral. Banks are more likely to approve a secured loan than an unsecured loan because they know that, no matter what, they’ll get something out of the deal. They may also be willing to give a lower interest rate to the borrower because of this security.
The disadvantage, however, is that if you can’t make your payments, you could lose whatever collateral you put up in the first place, putting you in a much worse spot than you were when you first sought out debt consolidation.
There are other forms of loans, such as specialized packages meant to help families consolidate student loan debt, but secured and unsecured are the main categories.
Once you know how much you’ll need to borrow on a debt consolidation loan, and roughly what kind of loan you’ll be able to qualify for, it’s time to figure out whom to borrow from.
How to identify debt consolidation scams
There are scammers in the world of debt relief and debt consolidation, sadly. They know that individuals with a sizeable amount of debt don’t have many options; they’re often looking for a quick solution to their problems. These lesser entities prey on those vulnerabilities, cheating individuals out of the little money they have left.
To identify a debt consolidation scam, keep your eye out for a few things.
Promises and Guarantees of a Quick Resolution
No reputable company will ever guarantee it can eliminate all of your debt in an incredibly short amount of time. Considering the amount of negotiation and personalization that goes into the process, that’s a promise no one can keep. The process can take 2-3 years but it is well worth the wait.
Large, Upfront Payments
Be wary of any debt consolidation company asking you to provide a large, upfront payment before starting to work on your behalf. More often than not, that company does not intend to do any real work to help you pay down your debt. “Take the money and run” isn’t just a song lyric.
Impersonal Business Practices
If the debt consolidator doesn’t bother to get to know you, then you probably chose the wrong one. Debt is a uniquely personal burden that occurs for different reasons for each person. There is no one-size-fits-all solution, and any debt consolidation company trying to convince you otherwise doesn’t have your best interests in mind.
How to choose a debt consolidation loan
So, you’ve narrowed down your list of potential providers to the reputable ones, and you’ve sourced debt consolidation loan offers from each. How do you choose one?
Consider the Monthly Payments
What’s more important to you, (1) only having to deal with a single monthly payment or (2) paying your debt off quickly?
Your answer should really be “both,” but it’s important to have priorities.
Some loans offer lower monthly payments over a longer period, presenting themselves as manageable options. Others ask you to pay more each month, allowing you to pay off the debt quicker.
For many, the monthly payment is not even a huge issue. After all, you can always pay more than the monthly payment once you’re ready to be more aggressive about paying down your debt, putting the control in your hands. Ultimately, though, you want to ensure you can make the minimum monthly installment.
Consider the Interest Rates
Interest rate will likely be the number one deciding factor when it comes to choosing a debt consolidation loan. After all, the interest rate is what determines how much you’ll pay over the course of time. It doesn’t make sense to roll a bunch of accounts with interest rates in the 7-10% range into a debt consolidation loan offering 12%.
Interest rate shouldn’t be your only deciding factor, though.
Consider What’s Realistic
The most important thing about debt consolidation is that you stick to the plan. You don’t want to be the person that runs up a bunch of credit cards, takes out a debt consolidation loan to pay them off, falls off the wagon, and has to do it all again. A debt consolidation loan should not simply serve as a way to relieve momentary financial pressure. It should be your ticket out of debt.
So, consider what’s realistic. When considering your repayment schedule and interest rates, don’t just calculate using ideal numbers based on what would happen if you put everything you had into paying off your debt each month. Pad for emergencies and moments of weakness.
Once you have a plan you feel good about, it’s time to figure out how you’ll pay off the actual loan.
What’s the secret to paying off a debt consolidation loan?
Here’s what everybody already knows and nobody wants to hear: The secret to paying off your debt consolidation loan is discipline.
Stick to your budget. Work hard and try to increase your income. Don’t overspend or let yourself fall prey to impulse buys. Don’t let other people pressure you into spending money you don’t have. For example, if the gals are heading out for a spa day, or your buddies are heading to the country club for dinner and a round of golf, don’t feel obligated to go. That money is better used elsewhere for the time being.
And, most importantly, don’t fall back into overusing credit. That is what got you into this predicament in the first place!
Are you ready to weigh your debt consolidation options? National Debt Relief can help! Do your research and check out some of our positive reviews first; then, contact us to chat about your options!