Debt Consolidation

When your financial situation becomes unmanageable and you are compelled to seek debt review/counseling, the first step is to seek professional help from qualified/experienced debt counselors. One solution offered by a debt counselor is a debt consolidation program. Under this system, the counselor seeks to bring all debts under a single umbrella so that they can be managed and dealt with as a single unit instead of separate entities. Hence, you don't have the stress of dealing with different creditors at different times, you don't have to juggle several unsecured loans with different interest rates and you can also negotiate a lower interest or fixed rate for a consolidated loan. You can also avoid being contacted or harassed by collection agencies. This is the best alternative to filing for bankruptcy and ruining your credit ratings. After choosing a good debt counselor, the consolidation program can begin. This entails: Initial review and counseling: Many debt consultancies offer free reviews and basic counseling so that they can understand your financial situation and needs. They can calculate your financial “well-being” and the amount of revolving debt you carry, income and living expenses. A total amount of debt can be arrived at, with interest rates and repayment schedules being mapped. Some consultants also offer financial advice to stem the further increase of debt by changing your spending habits, life-style etc. Appointment of debt counselor: Once you're convinced about the viability of the program, you can sign a contract and are assigned to a personal counselor. After this is done, you need to inform your creditors that you are now under a debt management program and that all calls should be directed to them. Payment plan: Your counselor will draw up the most appropriate financial management plan based on the information that you have provided. Hence it's important to be completely up-front with your counselor. This plan also takes into account your assets and anything that can be secured against the debts. The counselor will then forward this plan to your creditors and will negotiate with them to reduce interest burden and waive late-payment penalties. If the plan finds favor with creditors, then you can start making payments to the consultant who will give each creditor the agreed share. This way you don't need to be concerned about multiple interest rates as long as you make your monthly payments on time. Final settlement and maintenance: If all goes according to plan, then you should be clear of debt in the stipulated time. However, you also need to ensure that you don't run up new liabilities and that you address the underlying cause of your debts so that the situation does not repeat itself. Your debt counselor can provide the right type of advice and help you to take tough measures for this. Our financial situation can change at any time during our lives hence it is important to have the right kind of advice when we face money troubles.