Online Debt Consolidation Tips, Learn How To Pick The Right Debt Consolidation Loan For You!
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To many people who are in debt, consolidation probably seems like an answer to a prayer. However, if you are planning on taking this route, it is debt wise to proceed with some degree of caution.
Even though a debt consolidation loan looks like a great way to get a handle on your financial obligations, if you are not careful you could easily wind up in even deeper debt.
Online debt consolidation can have hidden fees or extra expenditures that you may not have initially considered.
For instance, the APR, which is, basically, your cost for being given the credit - also known as the interest rate - can be as high as 24%. This is astronomical and, depending on your financial situation, plunge you deeper into debt.
You must step back and take an objective look at your situation and clearly assess what you owe before taking this step.
On the upside, a debt consolidation loan can potentially lower your monthly payment by combining all of your debt, paying it off and allowing you to pay only one monthly note to pay off the loan. Typically, a person will take out a debt consolidation loan to pay off unsecured debts.
There are actually two types of debts and they each have very different meanings:
- Unsecured debts - these are debts that are not secured by collateral, such as unpaid credit card debt, personal debts, retail credit cards, store cards, lines of credit and medical bills.
- Secured debts - these are debts are secured by collateral, such as car loans and mortgages.
For unsecured debt, online debt consolidation may be a good way to go. There are a few things that you can do, though, to make the process smoother.
Tips for Online Debt Consolidation
- Gather your outstanding bills and credit report with fico score. You can obtain your credit report for free from the reporting agencies. There are dozens of places that you can go online to do this; the Federal Trade Commission website (ftc.gov) has information on how you can get your credit report for free.
You can order your free annual credit report from one or all national consumer reporting companies, Call toll-free: 1-877-322-8228 or visit: www.annualcreditreport.com
Online Debt Consolidation Guide, it is a good idea to check your free credit report fico score every few month to guard against identity theft, errors in credit reporting and other possible issues.
You should also gather your outstanding bills and put them on a personal budget worksheet. Determine from these documents that amount that you owe. Negotiating with creditors you may need to contact some of the creditors to find out the pay off for some loans and bills.
- Debt reduction spreadsheet determine how much you can afford to pay each month. From your monthly salary, subtract your regular payments such as rent or mortgage, utilities, food, insurance and other necessary expenditures.
The amount that is left over from this is called a debt snowball figure of how much you can spend each month toward your debt pay down. With debt consolidation, this is about how much your monthly payments on your debt consolidation loan will need to be in order for you to afford it.
- Shop around for a good interest rate. If you have very bad credit, or you are viewed as a risk, then you may be subject to a higher interest rate.
However, shop around and try to find a commercial debt reduction company that will offer you the lowest interest rate that you can possibly get.
Online debt consolidation my be a better way to go because they do not have the same expenses as a physical company that is set up in an office. This means that they can offer lower rates to process loans.
- Online Debt Consolidation, Narrow your search to the three best debt consolidation companies and check their validity. If the best debt settlement company that you select is affiliated with a well known bank, lending institution or credit union, then you should have no trouble researching them to see if they are a good fit for you. However, if they are independent, you may be hard pressed to find much of anything on them.
You can visit the Better Business Bureau's website www.BBB.org and find reports on hundreds of Debt Elimination Companies.
You can also do a search on the Federal Trade Commission's website for the best debt consolidation company or best debt consolidation companies that you have chosen. If there have been any judgments against them, you will find it there.
- Beware of the prospect of giving up unsecured debt for secured debt. If you are thinking of taking out a home equity loan or a similar loan where you will put up collateral, tread carefully.
If you are unable to pay off the loan you could lose your home. Consider this action carefully before you take that direction to pay off your debt. There are other debt consolidation loans out there that do not require such drastic measures.
- Double check your debt consolidation loan terms. If you try to pay off your loan early, will you get zapped with prepayment penalties? Do you have a fixed minimum length of the loan term or is it flexible to accommodate a changing financial status? Does your contract specify a variable interest rate or a fixed one?
These are all questions that you should have answered from your online debt consolidation company before you sign on the dotted line.
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