People who struggle under a mountain of debt are generally also fighting a poor credit rating, which is the numerical score that follows you into every facet of your financial life. Your credit rating can affect your ability to finance a car, obtain a mortgage, or take out any other kind of loan.
If your credit is marginal, you may get the financing you need, but at a greatly elevated rate of interest, which only adds to your existing high burden of debt over the long term. This cycle can go on and on — or it can be broken by taking the necessary steps to reclaim your financial well being.
Debt and bill consolidation have helped thousands of people free themselves from the cycle of mounting debt. The basic principle is simple. For instance, if the bulk of your debt is in a collection of maxed-out credit cards, the goal would be to create a single manageable balance with predictable monthly payments.
Many credit card companies provide balance transfers free of charge. The new card should have a sufficient limit to carry all the existing balances, and preferably a lower interest rate than what you are currently paying.
Beware of credit card offers with teaser introductory rates that jump dramatically after only a few months. A low interest rate, or no interest at all for as long as a year may sound enticing, but in the end, the deal could escalate your debt load. If you cannot resolve the amount in the time allotted, the high future interest rate will only make your situation worse.
Bill Consolidation Loans
Many people leverage their homes in order to get a secured loan for bill consolidation, which usually comes with lower interest rates. With a secured loan, or one that is backed by collateral, banks take less of a risk, and will be more willing to loan a higher amount at a lower rate of interest. If you have neither a good credit score nor a home for collateral, you can expect to pay a higher interest rate on a smaller sum.
When banks evaluate a loan application, they consider credit score and income. One is a record of the applicant’s financial history, the other an indicator of financial potential. A high income is not, however, a guarantee of loan approval, since jobs can be lost.
Choosing the Best Bill Consolidation Company
With so many variables coming into play, seeking professional help with loan and bill consolidation is a more effective way to handle the situation. With proper negotiation, it is possible to arrive at reasonable terms, but even the process of working with a consolidation agent requires your due diligence.
Always ask about the costs up front, and secure the terms in writing. A reputable consolidation company will be clear about the details of their fees and services even before you give them your personal financial information.
Look for bill consolidation companies that assign a single representative to your account. Also, ask if the company is accredited by either the Association or Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling.