Consolidating your debt can be the start of your financial freedom. It is a long process and it doesn’t always yield the quick results you deserve, but it is certainly a step up from having to file for bankruptcy. There are plenty of things you need to know about this process before you get started. Use this article full of carefully compiled tips to help you reach your goals!
If you’re trying to pay down your debt, try borrowing a bit from your 401(k) or other employer-sponsored retirement account. Be careful with this, though. While you’re able to borrow from your retirement plan for low interest, failing to pay it back as you agreed, losing your job, or being unable to pay it all back, the loan will be considered dismemberment. Your taxes and penalties will then be assessed as for why funds were withdrawn early.
Avoid storefront debt consolidation and major banks. Finding the right lender is as easy as searching on the web. Lenders found on the Internet can offer you a more streamlined process and not bog you down in paperwork and red tape. These lenders do not have to wait on a paper process to get these loans done quickly.
Have a clear payoff goal in mind. Rushing to get the lowest interest rate is not the best and only way to pay off your debts quickly. Consider how you can pay off your monthly debts in approximately 3 to 5 years. This helps you get out of debt and raises your credit score.
Don’t look at debt consolidation as a horrible thing that you are doing alone. This is a real common situation. Millions of people have been exactly where you are right now, and they’ve survived. Know that going in. It’s nothing to get worked up about. Channel that potential anxiety into the right action steps to move forward.
Your creditors should be told that you’re working with a service that handles debt consolidation. They could be willing to speak with you about making different arrangements. Unless you tell them, they won’t know that you’re working with someone else. It might help them understand you are making an effort to get control of your finances.
Make sure to take a look at the interest rates offered by any debt consolidation program you are considering. Remember that your goal is to reduce your monthly payments, and you won’t do this if you consolidate to a higher rate. This is an area where it is really important to compare different programs, so take your time and find one that offers you the best rates.
Do not get involved with a debt counselor that works for a company that pays by commission. This is a red flag as it’s going to alter your situation according to the best interests of the debt counselor and not your best interests. Instead, look for a reputable company that pays their counselors accordingly.
When consolidating your debt, it is extremely important to find a reputable, respected debt consolidation company. Before hiring a debt consolidation company, consider how long the company has been in business, the company’s perceived reputation and the amount of money that the company charges in fees. Shop around to find a debt consolidation company that meets your needs.
If you are going through debt consolidation, you really need to work with a debt settlement professional. These professionals will help you pay off your debt in a more timely manner as opposed to enrolling you in a debt management plan or filing for bankruptcy. They will help you preserve any credit that you have and start to rebuild any you lost.
Think about your long-term financial future. It’s easy to think in the short-term, as debt consolidation helps you almost immediately cut bills you need to pay on a monthly basis, but think about more than that. Ask yourself what you need to do so that your long-term financial picture looks good.
If you decide to consolidate your debts, be smart about the savings. Since you will be paying less each month on those bills, save as much of the excess as you can and put it in an emergency fund. That way, you will be less likely to get into debt in the future because you will have a small reserve from which to draw from when unexpected things happen.
Speak to an accountant before you get involved in a debt consolidation loan from a loved one. There are perks and problems associated with such a loan when it comes to income tax. The interest may be taxed, or they may receive tax deductions. Speaking to a pro will give you the scoop.
It is important that you know exactly what you’re up against financially. Debt consolidation in any form is often overlooked as a way to get out of debt. Instead of letting your finances drift off, get the help you need. Follow the simple advice discussed in this article to be on your way to a brighter financial future.
