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Are you in debt and feel trapped? Even though your situation may be overwhelming and gradually more stressful, there is no reason it has to get worse. Has the thought of debt consolidation ever crossed your mind? There are many practical options available for you to help improve your financial situation and start you on the road to becoming debt free.
Depending on how much money you owe, how disciplined you are, and what your future options consist of are all variables to help you find the best debt consolidation solution for you. Consider the following, and remember it is very important to do your homework before starting down the road to debt consolidation.
1. Create a Budget
The first step towards debt consolidation is assessing how much money you bring in versus how much money you spend. Begin by determining the total amount you take, and then list your usual monthly expenses such as mortgage payments or rent, car payments, insurance, etc. Once this is completed, you can now move onto the more complicated task of listing your variable expenses such as entertainment, recreation, and clothing. By having a written list of all your expenses can help you identify your spending patterns and make debt consolidation much more realistic.
2. Get in Touch with Your Creditors for Debt Consolidation
After you have a structured budget in place, contact your creditors and explain why you are having financial problems. Then, you can work together to create a customized payment plan that is manageable for you. This step is vital on the road to debt consolidation. Ignoring your creditors, will result in your accounts being passed on to a debt collector.
3. Debt Collectors
If you have been contacted by debt collectors already, there are a few important things you should know. According to the Fair Debt Collection Practices Act, a debt collector may not call you before 8 a.m., after 9 p.m., or while you’re at work. Collectors must honor a written request from you to cease contact and are not permitted to harass you or lie.
4. Home and Car Loans
In order to understand debt consolidation, you should know that there are two kinds of debt: unsecured and secured. Unsecured debts — like credit card debts, signature loans, and debts for services — are not tied to any asset. Secured debts may tie your car to your car loan or your house to your mortgage. Failure to make your payments, your car faces repossession and your house could be foreclosed.
The majority of automobile financing contracts allow a creditor to repossess your car any time without any notice if you’re in default. In order to get your car back, you may have to pay the balance due on the loan plus towing and storage costs. Failure to do this can result in the creditor selling the car. If you know you are unable to make your car payments, you might be better off selling the car to pay off your debt and avoid repossession expenses and a blemish on your credit report.
If you find yourself falling behind on your mortgage payments, get in touch with your lender immediately to avoid foreclosure. Many lenders will work with you if you seem honest and the situation is temporary. Some lenders may temporarily cut or suspend your payments, but you may have to pay extra towards your past due total when you resume regular payments. Another option is to have your lender alter your mortgage by extending the repayment period. It is important to ask whether there are additional fees for these changes. If so, figure out how much they will be in the long run so that it does not negatively affect your debt consolidation.
5. Credit Counseling for Debt Consolidation
If the methods above were unsuccessful, consider contacting a credit counseling organization to fix your financial troubles. Highly regarded credit advisors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. They can help you develop a personalized plan for debt consolidation. Though many credit counseling organizations are nonprofit, their services may not be free, cheap, or even legitimate, so do your research. Steer clear of any organizations that try to pressure you into making “voluntary contributions,” will not send you free information about their debt consolidation services, or charge high up-front or monthly fees.
Article Source: David J. Riklan – www.ezinearticles.com
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