Consumerism has affected this generation with the curse of being a debtor
A considerable part of the population is facing too many loans to repay. Sometimes it is causing your diseases. Proven that debt is a reason for treating heart attack and hypertension. The fear of being bankrupted may attack you every moment. So, what is the exit door of the problem? This article will show you the smartest way of repaying your debts.
If you do not feel qualified to consolidate your debts yourself, you can hire the services of a specialized company. The Messiah named as Consolidation Firm, this is the safest way for you to repay bank loans and credit eventually. I am going to give you a brief about their work and working procedure.
Holding a Magic Card: Credit Card
If you search and evaluate your shopping history, you will be stunned. You have bought almost all the expensive product with your credit card. The card seems helpful at that moment. But when you get the order to pay EMI, the sky has fallen upon you.
The burden of the interest is undoubtedly unbearable with the limited income. Some banks also offer an unlimited credit limit, this is ridiculous! End of the day, you are paying extra money for your excellent product.
The consolidation firm will gather your credit card information and the category of the shopping. When you are taking a loan from them, it is their responsibility to spend it in the proper measure. Paying a high-interest rate is an obstacle for repaying to the lenders. If you want to get rid of this rocket graphed interest rate, start paying for today.
Sometimes it is challenging to pay all our receipts. Temptations make it easy to get into debt, but it may not be so easy to get out of debt, and when there is more than one creditor, the situation can be quite overwhelming. One of the possible solutions to this situation is debt consolidation.
There are times when you can consolidate yourself, for example, when you can negotiate a lower interest rate for a credit card and transfer to this card other debts from other cards with higher interest rates (watch out for transfer fees ). But different situations are more complicated and for which you may not feel qualified.
If you do not feel qualified to do it yourself, you can hire a debt consolidation company
An advisor will analyze your financial situation:
- Number of unsecured loans (such as credit card debt), number of secured loans (mortgages, car loans), the total amount of debt, interest rates, etc.
- The advisor will negotiate with your creditors to try to reduce the total amount of your debt.
- The counselor will consolidate all your debts into one payment, so you avoid having to deal with multiple creditors.
- The consultant will talk with you to know what your budget is and prepare a plan to pay your consolidated debt based on your possibilities.
- Many debt consolidation companies offer free professional advice.
Many times the debts of credit cards are about to get out of control and action needs to be taken to avoid overindebted. A common repayment strategy is debt consolidation.
Through consolidation, you get a loan to settle the accounts of your credit cards, and you are responsible for paying a single mortgage. This strategy is not ideal for everyone, so you should be informed about the advantages and disadvantages of making the best decision.
- Combine several payments into one: It allows you to organize yourself and the convenience of making a single monthly fee.
- Obtain lower interest: If you have good credit, most options to consolidate your debt, either a personal loan or a home equity line of credit, offer you lower interest rates than credit cards.
- Reduce monthly payments: If the interest on your new loan is low, your monthly fee will be too. Also, if you pay on time and consistently, you would avoid any late payment penalty and exceeding the credit limit.
- Pay 100% to your creditors: It would settle the debts to your creditors and preserve a positive payment history if the accounts have been on good terms with your creditor.
- It can cost you more money in the long run: Despite getting interested and reduced payments, if the repayment period is extensive, at the end of the life of the loan, you may end up paying more. In addition, depending on the consolidation method you use, your total debt may increase with the addition of fees associated with the loan or fees.
- You can borrow more: Whether by necessity or by will, if you reuse the cards, you already paid, you would face paying the original debt plus any new debt.
- It can be more expensive: If you consolidate your cards with an insured loan, such as a line of credit on your home, failing your payments puts you at risk of losing your home or any other valuable possession you have used to secure your loan. You should avoid putting at risk things whose total value is higher than the amount of your credit.
- Adverse effects on your credit: Consolidating debts can affect your credit score by changing the utilization of your loan. You do not eliminate debt, but combine it and alter the balance of debt and credit available. If you close your paid credit cards, you also get your score.
Often a consolidation remedies a symptom, but it does not solve a major financial problem. Before determining whether this strategy is right for you, explore the causes of your debt and evaluate other repayment options such as a Debt Management Program, auto payment strategies or work directly with your creditors.
Fraud in the consolidation of debts
Due to the increase of liabilities in Spain, there is a rapid growth of companies dedicated to debt consolidation, so you should be careful if you are going to hire one of these companies to consolidate your debts.
Working Manner of Consolidation Firms
Do you know how a consolidation firm works? Well, they will offer you to request a loan at first to pay the debts. When you repay the bank loans, then you have to pay the mortgage to the firms with a nominal interest rate. The firms will never charge you extra cash. But they will judge you very carefully.
The Consolidation firm will take your previous history on their account. When they are fully satisfied with your plans, they will give you a chance for easy repayment. The debts of the bank are increasing. On the other hand, consolidation firm has a strict plan of debt.
So, their debt will not increase. All you need is to schedule a proper plan for having a good relationship with the creditors.