Have you ever heard the term debt consolidation? If you’re heavily in debt, chances are you’ve heard the term maybe in conjunction with a loan–that is a debt consolidation loan. However, it is possible to do debt consolidation yourself and without taking on new debt.
Here’s what to do
The first step in DIY debt consolidation is to prepare a list of your debts and arrange them in the order of priority or those you feel are the most urgent.
Next, calculate what you can afford to pay. Here you will need to list your income including your wages and any other forms of income. You will use this number to calculate the total amount you could afford to pay per month on all your bills.
If there’s a collection agency involved
Decide who you want to pay first and make sure that those creditors still have your debt as they may have sold it to a collection agency (CA). If you find that any of your debts have been sold to CAs, you will need to ask them to validate your debts before you begin paying. You should use a debt validation letter to do this.
Negotiate
The fifth step is to contact your creditors and negotiate with them to reduce your interest rates and the payments on your debts that have very high interest rates. You will need to keep a running total of how much you’ve agreed to pay each of your creditors. This is to make sure your total monthly payment won’t exceed what you can afford to pay. Also be sure to ask your creditors to wave any late fees.
Consolidate credit card debt
If some of your credit cards have small balances, you can consolidate them into another credit card using balance transfer. There are cards available today called zero balance transfer cards. If you choose one of them, you can transfer your balances from other cards and pay no interest for six to 18 months. You’ll have to continue paying against your balance owed but your payment will definitely be lower. When your “grace period” runs out, you’ll be paying much less interest because you’re making a single payment on a card with a lower interest rate.
If you can’t do DIY debt consolidation
If you’re seriously over your head in debt, you may not be able to do debt consolidation yourself. In this case, you could apply for a debt consolidation loan. If you have an asset such as your house, an automobile or vacation home that you can use as collateral, you should be able to get what’s called a secured loan. If not, you’ll have to try for a personal loan or unsecured loan. These generally carry higher interest rates than secured loans because the lender is taking more of a risk.
The “Catch-22”
The problem with a debt consolidation loan is that the more you need one, the more difficult it may be to get one. There is an old saying that banks only want to lend money to people who don’t need it. While this isn’t absolutely true, it is a fact that financial institutions are very hesitant about lending money to people who are already deeply in debt. If you do have trouble getting a decent loan then debt settlement might be a better option.
We’ve helped hundreds of families
Here at National Debt Relief we have helped hundreds of families get out of debt in 24 to 48 months and live happier, less stressful lives. Go to our homepage, fill out the free debt analysis form you’ll find there, and see for yourself what we could do to help you enjoy relief from your debts.
