One of the most stressful situations to be in today is debt. It can arise from applying for credit cards and then being unable to pay them back. It can also arise from taking out a loan and then failing to pay it back. In most cases, we simply take out more loans to pay off the ones we already have. In such a case, one gets deeper and deeper in debt. How can the individuals in this form of debt get out of it? One of the ways to do this is debt consolidation.
What is debt consolidation?
This is a process where one takes all the individual debts that they have and combines them. After that, you take out a new loan for a large sum and you pay off the individual debts you have. After that, you only have the single large loan to pay.
According to the logic of debt consolidation, this new loan should have a much lower interest rate than the other ones that you have. In this way, you can pay it off in affordable monthly payments. By staying dedicated to them, you can get rid of your debt comfortably and efficiently. Do you want to learn some more about debt consolidation made super easy? Read on to find out.
Debt consolidation is a third party process
One of the characteristics of debt consolidation is that it involves a third party. In this process of debt eradication, a credit counseling organization mediates between you and your creditors. They receive monthly payments from you and distribute them among your creditors.
The credit counseling organizations are often non-profit agencies. They have existing arrangements with financial institutions that offer low interest loans. Therefore, they receive your debt consolidation application and arrange a loan that covers all your debt and has a low interest rate that you can afford. Moreover, they can negotiate with your creditors to reduce or completely eliminate any late fees and other charges that you could be having.
There are various types of debt consolidation agencies
In the world of finance, there are many organizations and bodies that claim to be legitimate yet are fraudulent. The field of debt consolidation is no different. There are many organizations in this field that claim to help you get rid of your debt, but instead defraud you.
Thus, you need to be careful as you pick a credit counseling organization to work with. One of the ways that you can vet the ones which you choose is to ensure that their standards satisfy the instructions of recognized bodies. Examples of these are:
- The NFCC (National Foundation for Credit Counseling).
- The Council on Accreditation
You should check if they comply with these bodies so as to ensure that their officers are not corrupt, are fully trained and accredited to assist clients on how to get rid of their debt through consolidation.
Many financial advisers agree that debt consolidation is an effective way to get rid of your debt. It offers an effective and measurable way to get out of debt by managing it better.
Legitimate debt consolidation organizations actually have a counseling session where you learn how to avoid more debts after you clear your current ones. With this debt solution, you can eliminate all your debt in 3 to 5 years.