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Top 10 tips for debt consolidation

Published by admin on November 28, 2009

If you have a mountain of debts, it’s easier to get out of the debt spiral by consolidating your high-interest debts into one lower-interest loan. However, not all debt consolidation deals are equal, so there are some things you should consider before making a choice:

1. Make sure you understand the terms.

It’s important that you understand exactly the contracts that you’re signing. Take your time and after you’re done, you should know exactly how much you’re going to pay, including what charges and taxes you have to pay.

2. Be careful when choosing the length

If you take a longer term loan, you might end up spending more on interest, even if the yearly interest is lower.

3. Check the trustworthiness of the company

If you use the services of a company to help you consolidate your debts, you should check online reviews and the Better Business Bureau ratings and complaints before signing the contract.

4. Consider debt settlement

If you’re in deep debt trouble, debt settlement might be a solution, trying to negotiate with the creditors. Sometimes, it’s costly, but if it helps you avoid bankruptcy, then it’s probably the best solution.

5. Think of whether you can refinance your mortgage

If you refinance your mortgage, you can move your high interest unsecured debt into secure debt, with a much lower interest. However, be careful to make a choice for which you can’t miss a monthly payment, so you won’t get a foreclosure.

6. Borrow money against your life insurance policy

If you have a life insurance policy, you an borrow money against it and strictly speaking, you don’t even have to return it, if you don’t want or can as it will be deducted from amount given to the beneficiaries.

7. Avoid predatory lenders

Having high-interest loans to banks is bad enough, so don’t even consider getting some loans from shady sources. Getting a high interest loan from a loan shark will just get you in more trouble.

8. Check your credit report

Before making any deal, you should know exactly how much you owe, how much interest you pay and what are the monthly payment. You wouldn’t recognize a good deal if you don’t know what you currently have.

9. Non-profit doesn’t necessarily mean good

Some debt consolidation agencies are not-for-profit companies, but you should be as careful as with any other companies: this status doesn’t mean you’d get the best deal available.

10. Do your own research

Check the offers from multiple companies and see which is better for you. Many companies offer free quotes, so you can sign up and see whether it suits you.

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