A large number of people have debt, and more are finding it increasingly difficult to make their monthly debt repayment obligations. Debt consolidation is one way out from under your financial burdens, but if you’re not careful, you may end up even deeper in debt. The first step to getting out of debt is to determine exactly what your financial goals are. Do you want to eliminate your debt completely? Or do you want to bring your debt under control while boosting your credit score at the same time?
To arrive at a determination as to where you are going, you need to sit down with a pencil and paper. Write down all of your current bills, including those that are for services that you don’t currently use but that you are required to pay for because of some type of government requirement. Include any loans such as auto loans, credit card balances, home equity loans, student loans and any other outstanding obligation. Include any income you have, that you need to pay each month as well, such as alimony or child support.
You now have a clear outline of exactly how much debt repayment you need to make each month. The next step is to decide what kind of lifestyle you are planning to maintain in the years to come. If you want to completely eliminate your debt, you will not only have to make all of your individual payments to each lender, but you will also have to cut back on your expenditures. You can reduce your spending by reducing your overall spending budget and using the money instead to repay your lenders. You can also save money by increasing your savings or investing it.
If you are simply trying to increase your monthly expenses, you need to sit down with your creditors and work out a repayment plan. This can include lowering your interest rate or extending the term of your loan. You can also negotiate with your creditors to reduce the amount of debt you need to pay each month. Some creditors may even agree to reduce your principal balance. In exchange, your monthly expenses will be lower and you will have more money each month to help you with your debt repayment.
One option available to you if you cannot come to an agreement with your creditors is to use a debt management plan. Debt management plans allow you to manage your debt payments on your own through a professional agency. They will help you set up a budget that will help you keep from getting behind. You will make one payment to the debt management plan and they will distribute it to your creditors on your behalf. You will be able to make one payment to the agency and they will in turn distribute it to your creditors.
One thing to note about a debt management program is that creditors do not have to accept the plan. If they accept the plan, they give you the opportunity to repay your outstanding balance at any time without making any additional payments to the agency. You may find that your creditors will agree to the repayment schedule if they are not facing bankruptcy and you may not have to file for bankruptcy to avoid this arrangement. Your creditors will usually get a written offer from the debt management program; however, you still have the ability to negotiate with your creditors on your own to modify the terms of the plan.
Another option available to you if you cannot come to an agreement with your creditors is to apply for one or more loans to assist you in your repayment. These types of loans are called cash loans and are very similar to the consolidation loans that you used to pay off your other debts. Usually, these loans are easier to obtain because you are not required to make payments to the creditors until after you have completed repaying the cash loans.
Both debt consolidation loans and repayment plans are helpful for your current financial situation and should be explored. If you are in serious financial trouble, you may want to consider filing bankruptcy to avoid the negative consequences. However, before you make such a decision, you should try to explore all options available to you to consolidate your debts and lower your monthly payments.