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- 2 min read
Learn about Your Debt Consolidation Options
Debt Consolidation options include refinancing your mortgage to pay off other debts, receiving credit counseling, or reaching a debt settlement with your lenders. Bills.com co-founder and co-CEO, Bradford Stroh, reviews when each of these options is appropriate and how each will affect your credit rating. He also reviews the long-term costs of each option. Before choosing one, determine whether your goals are lower payments or paying off the debt faster, and then contact a reputable provider to begin the process.
Video Transcription;
"Hi I’m Brad Stroh of Bills.com and I am going to talk to you today about the confusing topic of debt consolidation and specifically try to help define what all these debt consolidation alternatives are out there. Now first when it comes to debt consolidation you’ve got a bunch of different types of solutions. If you have excellent credit and you’re a homeowner you can do a debt consolidation loan which is where you roll all of your outstanding debts into a new mortgage that typically has a much lower interest rate that’s tax deductible and lower cost. The downside there is it’s a 30 year repayment period on average.
The next option is an unsecured loan a debt consolidation loan, you need excellent credit and very high income and typically their reserved for people who are customers of credit unions or local banks. Now if you have financial hardship you have two alternatives, Credit counseling and debt settlement. Credit counseling is a program where you enter into a debt management program which lowers your interest rates not dramatically but gives you a little bit of financial relief and it’s typically about a 5 year repayment program that can save you significant amounts versus just making your monthly payments.
Now a more aggressive hardship program is called debt settlement or debt resolution. That’s a program where your provider literally negotiates settlements on your behalf. That’s reserved for people who can’t afford to make their monthly payments to significantly reduce the actual principle that you owe. It’s a program that can save you a lot of money and with a very low monthly program payment typically get you debt free in about two to four years. Now lastly if you can’t afford any monthly payment and you have severe financial hardship you should seek the council of a local bankruptcy attorney to explore a chapter 7 or 13 bankruptcy.
So in sum you’ve got a bunch of different debt consolidation alternatives. Make sure you understand how each impacts you and choose the best one for your needs. Thanks for visiting Bills.com, where were helping people save money every day."
Get rid of your debt faster with debt relief
Take the first step towards a debt-free life with personalized debt reduction strategies.
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Dealing with debt
If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q1 2024 was $17.69 trillion. Student loan debt was $1.60 trillion and credit card debt was $1.12 trillion.
A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.
The amount of debt and debt in collections vary by state. For example, in North Dakota, 16% have any kind of debt in collections and the median debt in collections is $1866. Medical debt is common and 7% have that in collections. The median medical debt in collections is $629.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.
