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Debt Consolidation Queries Solved

Different Types of Debt Consolidation:

There are several ways to achieve debt consolidation, including one that does not require borrowing more money. Debt consolidation options include:

1. Home Equity Loans – A popular method of debt consolidation, the home equity loan is a mortgage based on the amount of equity you have invested in your home. It should be noted that home equity loans are secured by your house, which means if you fail to make payments on schedule, and according to the terms of the loan, you risk losing your house.

2. Personal Loans – Many banks and other lenders offer unsecured personal loans based on your annual income. The amount that can be borrowed will vary from person to person, and not everyone will qualify for this type of loan. To use personal loan proceeds for debt consolidation simply deposit the loan money into your bank account and write checks to your creditors, or ask the lender to disburse the money to your creditors for you.

3. Private Loans – Some people may be able to borrow from family or friends and arrange very individual terms. Borrowing from others in your personal life can be tricky business and it is advisable to make sure any arrangements are made in writing.
Counseling Agencies

Counseling agencies go to the lender and negotiate a lower interest and/or fee. After that you end up making one monthly payment to the counseling agency, Which then pays your creditors. Their fee is lumped into the monthly payment. A lot of times you could have done much better of for yourself if you would have dealt with the creditors personally. This is not really a debt consolidation loan since you don't really refinance anything, it more like debt restructuring. If you can stick with the program you can be out of debt in 3-5 years.

The biggest fear people have when dealing with the counseling agencies is that the agencies will ruin their credit. Quite honestly if you are already behind on your bills and haven't been able to put a dent in them, a counseling agency debt consolidation program is not going to make your credit much worse than it already is. It will make your score drop a bit, but when you look at the benefit of being debt free a few years down the line it's a lot better alternative to declaring bankruptcy.

Consider debt consolidation with a counseling agency if:

--You are falling way behind on your bills and there is not another alternative. These kinds of counseling programs are for people who are having problems paying their bills on time, not for people who want a lower interest rate.

--Most of your debt is not a secured loan. In other words a car loan, home loan, or a student loan. Since there is collateral involved the counseling agency has a harder time renegotiating the terms.

Don't do debt consolidation with a counseling agency if:

--You know yourself better than anyone else if you can't stick to a little program for a week or a few months by all means don't try and do this program that is going to take a few years to complete.

--You haven't done you due diligence and thoroughly checked out the company. Since they are acting as a mediator and you are paying them they can screw things up really quickly and you will still be held responsible (it really does happen check out the news release section) Make sure you choose an agency that will give you the support you need for the long haul...3-5 years.
Protect Yourself Beware of credit counseling organizations that:

--charge high up-front or monthly fees for enrolling in credit counseling or a Debt Management Plan.

--pressure you to make "voluntary contributions," another name for fees.

--won't send you free information about the services they provide without requiring you to provide personal financial information, such as credit card account numbers, and balances. -try to enroll you in a Debt Managment Program without spending time reviewing your financial situation.

--offer to enroll you in a Debt Managment Program without teaching you budgeting and money management skills. -demand that you make payments into a Debt Managment Program before your creditors have accepted you into the program.