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Choosing the Right Debt Consolidation: Differentiating the Good from the Bad

Published November 15, 2011

It is true when they say that people learn the hard way. Debt burden is a consequence, which every extravagant spender must face. Some people learn the lesson sooner and avoid financial harms, while others face monetary calamities, which cause them to seek refuge from others. Credit cards have become the evils of every debt-laden individual and consolidation of debt has become an excellent tool to bring down the scaling debt amounts.

Debt Consolidation: A Guide to Debt Relief

If you have dreamt of having to pay only creditor every month, then debt consolidation is your dream come true. It helps to bring together your debt from a number of small payments into one single payment, discussed by the counselor with the creditor, on a lowered interest rate.

Selecting a Debt Consolidation Firm:

Choosing the right debt consolidation is the first step when you plan to avail any type of debt help. The best company for you should have your best interests in mind. It should have good reviews and the fee structure should be reasonable, according to your needs. The selected debt consolidation firm should send you the monthly bills consolidated into one, once you have hired it. You only have to make payments to that firm and do not have to contact any creditor yourself.

Differentiating Good Debt Consolidation from Bad

Agencies that offer debt consolidation do not always offer what they have presented to the customers. Some features that may seem attractive before are usually laden with bad affects. Here are some possible features that you should consider before choosing the debt consolidation for you, which can be either good or bad for your financial health:

Searching the Company at BBB

One thing, which many people forget to do before selecting their debt consolidation agency, is to do some research about the firm. The Better Business Bureau or any other consumer reporting agencies are there to help the individuals know about the negative aspects of any company. If the firm is a rip-off, you can know from these kinds of agencies. Any good report or complaints about a bad consolidation firm are available at these agencies.

Exorbitant Expectations

Bad or fraudulent companies are offering additional features just to captivate customers into paying more for less. Instead of looking into ways to cut down the monthly down payments, such companies work with the creditor for their own benefits.

Also, remember that, unscrupulous consolidation companies will also not give you all the facts when it comes to consolidating your debt. While, a good credit consolidation company will take the time to have a lengthy consultation with you in order to go over your current finances.

Secured Debt Consolidation Loan

Secured debt loan, like the home equity loan is one of the most favorable options available for the people who want to get rid of huge debt amounts at once. All your assets are put aside as collateral, until you pay for the loan payments.

Some people believe getting secured debt consolidation loan as a bad option as it may cause the loss of property and other valuable assets, if financial failures befall.

Deciding the Fee Structure

It is always good to do some homework about the debt consolidation firm to know about its functioning properly. You can differentiate about the good consolidation agency from the bad one by calculating their fee structure according to the markets. At times, the fees can be up to 20% of your debt and sometimes it can be higher. However, before you decide on agreeing to any fee, take a figure from other consolidation firms.

Opting for Voluntary Contributions

Voluntary contributions are the debt payments offered by you, in addition to the settled debt amount by your counselor. This voluntary payment will help the debts clear faster. Make sure to opt for such consolidation firm that supports voluntary contributions as much as possible. However, if a company is asking for money other than the debt amount, then they may be just adding an extra unnecessary expense to your head. Such companies are a bad option.

Filing for Bankruptcy

Bankruptcy may be very attractive option to the ears as it helps getting rid of debt, but this debt relief option only offers temporary support to your problems. Consolidation firms that push the individuals to opt for bankruptcy options, without their willingness, greatly hurt the financial stability of an individual.

In short, a debt consolidation firm, which is offering you the best possible solutions in dealing with debt and provides you with the financial assistance you want by negotiating with your creditors, is the best option for you, while any deceitful firm will be causing you monetary strains and may not help you in the repayment of debt.

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