While loans are a reliable source of finance, the inability to settle them can be damaging. Debt can affect your credit score and drain you and your loved ones emotionally as you may go through denial, stress, and sometimes panic when debtors start piling up pressure. That’s where a debt relief company comes in, with one of the most workable solutions to overdue loans being debt consolidation.
Wondering how consolidated debt solutions work? Debt consolidation can help get all your multiple monthly payments under control by turning them into a single, predictable payment. But debt consolidation isn’t a get-out-of-debt-free card — you’ll need to have good spending habits to stay debt-free. Read on for more details.
What is Debt Consolidation?
Many people don’t owe a single debtor. Suppose you owe several small loans (to different loaners) in the form of student loans, mortgages, or credit card bills. Under such circumstances, debt consolidation helps combine all your debts into one loan. You can find expert help about debt relief companies at sites like https://www.freedomdebtrelief.comto understand the technicalities of the entire process.
The method used to consolidate your loans typically depends on your current monthly payments, interest rates, and credit score. Additionally, the type of your loan (unsecured or secured debt) highly determines your consolidation options. Secured loans are easier to handle since the provided collateral comes in to settle the loan, but vice-versa is true about unsecured loans.
Examples of Debt Consolidation Solutions
When it comes to debt consolidation of unsecured loans, there are a few hacks that work:
- A debt management program. It provides reduced interest rates on a consolidated loan and an extended period to clear the loan in affordable monthly installments. The plan also goes a long way in saving you from overwhelming creditor calls and threats.
- Credit card refinancing. It’s another workable method, especially if you have a good credit score. It works by performing a balance transfer that involves moving an outstanding debt from one credit card to another. Here, the aim is to transfer what you owe to a card with more benefits and significantly lower interest rates.
- Applying for personal loans. These loans usually don’t require collateral, so they are perfect for turning multiple balances into a single monthly installment. When the sterling credit score is lower, personal loans offer chances of converting high interest revolving debt into a single installment paid monthly at a lower interest rate.
- Line of credit. It involves using your home equity to consolidate your credit cards. You’ll use your property’s current market value as collateral to settle part of your debts, making this option similar to taking a second mortgage. However, it’s wise to get the help of a debt relief company since the process may add to your existing debts—an expert can help mitigate any unforeseeable damages stemming from accruing debts.
Does Debt Consolidation Get You Off the Hook?
Debt consolidation confuses many people. You might think that your debt problem is gone when you find relief in terms of reduced interest or reduced payable loans. However, that doesn’t mean your debt is gone since you’ll still have to pay it up in full. Loan consolidation generally helps you heal from your bad financial habits by giving you a jumpstart after a financial fall. Once you’ve settled your debts, the best thing to do is get financial counseling to settle on a budget that will deter you from slipping back to your old habits.
Now that you understand how consolidated debt solutions work and the options available for you, it’s time to find the right partner to walk you through the process. A professional can will help you choose a suitable solution, including customizing the payment program. At Freedom Debt Relief, we provide you with debt relief options and offer credit card relief consultation free of charge. We make it our primary responsibility to see our clients free from financial risks, and this has been the case since 2002.