Consalidating My Debt - The Bills.com Blog
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Consalidating My Debt
Question: i am thinking of consalidating my total debt of $16,000.00 in credit cards. How will the consalidating effect my credit score?
Answer: Thanks for your question, and credit rating impact is an important consideration in comparing credit card consolidation alternatives.
Very quickly, if you want a free debt consultation with one of Bill's approved debt help partners, click here: http://www.bills.com/debthelp/debt/
Online debt consolidation comes inmany forms, so it is important that each consumer reflects on what their needs and concerns and financial situation is before signing up for an online debt consolidation program. The four primary concerns for most consumers are: i) monthly payment, ii) time to debt freedom, iii) total cost, and iv) the credit rating impact of the consolidation program. Be sure to evaluate each program, relative to your prioritization of these factors.
Since there are a variety of online debt consolidation options, including credit counseling, debt negotiation/debt settlement, a debt consolidation loan, and other debt resolution options, it is important to fully understand each option and then pick the solution that is right for you.
Credit Counseling
Credit counseling, or signing up for a debt management plan, is a very common form of online debt consolidation. There are many companies offering online credit counseling, which is essentially a way to make one payment directly to the credit counseling agency, which then distributes that payment to your creditors. Most times, a credit counseling agency will be able to lower your monthly payments by getting interest rate concessions from your lenders or creditors. It is important to understand that in a credit counseling program, you are still repaying 100% of your debts ? but with lower monthly payments. On average, most online credit counseling programs take around five years. While most credit counseling programs do not impact your FICO score, being enrolled in a credit counseling debt management
plan DOES show up on your credit report? and, unfortunately, many lenders look at enrollment in credit counseling akin to filing for Chapter 13 Bankruptcy ? or using a third party to re-organize your debts.
Debt Settlement
Debt settlement, also called debt negotiation, is a form of online debt consolidation that cuts your total debt, sometimes over 50%, with lower monthly payments. Debt settlement programs typically run around three years. It is important to keep in mind, however, that during the life of your debt settlement program, you are NOT paying your creditors. This means that a debt settlement solution of online debt consolidation will negatively impact your credit rating. Your credit rating will not be good, at a minimum, for the term of your debt settlement program. However, debt settlement is usually the fastest and cheapest way to debt freedom, with a low monthly payment, while avoiding Chapter 7 Bankruptcy. The trade-off here is a negative credit rating versus saving money.
Debt Consolidation Loan
In a debt consolidation loan, you exchange one loan for another. Many people think first of a debt consolidation loan when seeking online debt consolidation. This option typically means a second home loan (or home equity line of credit) or refinancing your primary mortgage. In case you do not own a home, then your option is limited to an unsecured personal loan. Your ability to find a lender willing to loan you money will depend of several factors, primarily your credit score, your income, and your assets. You state
that you do not own a home, which means that you cannot take out a home equity loan. However, if you have other assets, such as a vehicle, you may be able to borrow money using those assets as collateral. Interest rates on secured loans tend to be significantly less than unsecured notes, which is especially helpful for those with credit problems.
With poor credit, you may not be able to find an unsecured loan to fit your needs. If you do find a loan, you should expect to pay a premium in interest for the credit risk you pose to the lender. Many banks are hesitant to lend to borrowers with poor credit. Luckily, there are alternative lending sources that you should explore, such as Prosper (www.prosper.com), where private lenders offer loans to private borrowers. I also encourage you to visit http://www.bills.com/loans/
Net-net: While there are many forms of online debt consolidation, many people with good to perfect credit who own homes should look into debt consolidation loans, while consumers with high credit card debt and poor credit may want to explore debt settlement or debt negotiation. However, each consumer is different, so find the online debt consolidation option that fits for you.
Bills.com makes it easy for you to apply, by following this link:
Debt Relief Savings Quote
I hope this information helps you Find. Learn. Save.
Best,
Bill
www.bills.com
Also, make sure to get a free financial health check-up with Bills IQ!
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