Coping With Debt Through Credit Consolidation Plans
If you are stressed out due to high interest debts, then you are likely to find that coping is a challenge. It is not possible to feel stress free if you are not able to make your monthly payments on high interest loans, credit cards or even medical bills. If you are thinking of a credit consolidation plan as a possible solution, then you need to understand the process of how it works to make an educated decision.
Credit Consolidation:
When you are looking at credit consolidation, you need to understand how the program works. Without learning the basics, you are not able to make an educated decision about the best debt relief solution for your situation.
Credit consolidation is a process of reducing your monthly payments by lowering the interest rate on your debts. Depending on your current credit score and the interest rates on your debts, the savings will vary dramatically. If you are working with a consolidation company, then you should expect added fees and costs beyond your basic payments.
Taking out a consolidation loan is one of the most common methods of getting your consolidation in order. The problem is that if you are struggling with debt payments, then your credit is not likely to have a high enough score to get the best interest rates on a new loan. If you are looking at a loan from a traditional lender, then you should expect a high interest rate or a denial.
Turning to alternative lending might provide you with a loan, but it is not likely to end up with a low interest. Struggling with your payments means that your credit score is not likely to obtain the best rates available for peer-to-peer lending. You should expect an interest rate between 20 and 36 percent though the exact figure will differ based on your current credit and your debt to income ratio.
Consolidation is only effective if you are able to lower your interest rate. If you are not eligible for a loan that is less than your current interest, then you will end up in a worse financial position.
Credit consolidation is not the best solution if you are looking for ways to cope with the stress of high interest debts. Since you are not likely to get a consolidation loan that is worth the effort of looking into your options, you should look at settlement as a possible alternative.
Settlement Option:
A settlement is not exactly same as a consolidation loan. Instead of trying to lower your interest rate, settlement works on reducing your principal. When you settle your account, professional negotiators acting on your behalf will talk to the creditors. The lender will listen to the situation and will work on reaching an agreement that allows you to pay a lump sum of cash for a fraction of the principal you owe.
When the lump sum payment is made, you are then free of the debt. The lender forgives the remaining amount on your account and allows you to move on with your life. This method of reducing debt is much less stressful than consolidation, and it reduces the amount you need to pay rather than requiring you to continue making monthly payments.
Settling the account is a beneficial way to cope with the stress of dealing with your loans, credit cards and other unsecured debts because it removes the debt from your monthly responsibilities. You will be able to move forward and start working on building a secure financial future. This is a key aspect that sets settlement apart from consolidation and makes it a better solution if you are already struggling to make your debt payments.
In most cases, you can get out of debt within 24 to 48 months, depending on the number of loans and credit cards you want to settle. By paying off the debt, you are able to start working on your financial future rather than worrying about the monthly payments.
High interest debts are a problem when you are struggling to manage your monthly payments. While a credit consolidation plan might seem like the optimal solution to your problem, in most cases, it is not good enough. Instead of consolidating, you should consider a settlement to eliminate your debts.