Ask Bill your personal finance question

Turned down for debt consolidation? There is still hope

how can you consolidate your bills when your late with your bills and no one will give you a loan to consolidate?

how can you consolidate your bills when your late with your bills and no one will give you a loan to consolidate?

Read full question
Bill's Answer
3.9
/5.0
(7 Votes)

Bills.com | Find Learn Save

Thanks for your question. I'm not sure about your specifics, so I'll go through each of your debt consolidation options (and pros vs. cons of each) and then at the end I can give you a link that will let you get matched with the right provider for you.

Online debt consolidation comes in many forms, so it is important that you reflect on what your needs and concerns and financial situation are 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

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 a debt consolidation loan, you exchange one loan for another. The most frequent form is taking out a mortgage loan, which carries a lower interest rate and is tax deductible, to pay off high interest rate credit card debt. It is important to be aware that shifting unsecured debt to secured debt can create a volatile situation, if there is ever a chance that you cannot afford the new mortgage payment you are now putting yourself at risk of foreclosure! In the case of a debt consolidation loan, most mortgages are 30 year loan, which means that the total cost and the time to debt freedom could be very high? but the monthly payment will be lower than other options and there is no credit rating impact.

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.

I hope the information provided helps you Find. Learn. Save!

Best,

Bill

www.bills.com

Get Debt Help!
3.9
/5.0
(7 Votes)

People also like to Read

Betsalel Cohen

Debt consolidation loans for bad credit are a limited and expensive option, if you have a serious debt problem. Instead, look... Read more >>

Betsalel Cohen

The best way to consolidate credit card debt | There are different paths to consolidate credit card debt. The cheapest is a m... Read more >>

Betsalel Cohen

Consolidate Debt | Review quick tips you need to know, before consolidating debt and credit, such as...... Read more >>

Daniel Cohen

Military Debt Consolidation | There are some key differences between consolidating debt when you are in or out of the militar... Read more >>

0 Comments

1500 characters remaining
loading...