Debit Consolidation: July 2008

Debit Consolidation Advice

Credit Card Debit Consolidation
First things first – cut up all your credit cards. You’ll never get out of debit if you keep spending money you don’t have. And that’s really what this is about, isn’t it? Setting a budget and living by it. Don’t get a debit consolidation loan just to go into more debit that you can’t pay. It’s a viscous circle, and you don’t want to be caught up in it. Bottom line – don’t even think about debit consolidation for your credit cards unless you’re ready to change your spending habits and live on a budget.

Controlling Credit Card Debit
When you use credit cards, you are borrowing money. And borrowing money means you’re paying interest on it. There’s no such thing as a free lunch, right? Well, mostly. There are some lunches in the debit repayment world that are free – for a time. If you have a credit card debit with high interest rates, think about trying to find a zero percent interest card that you can transfer it to, and make sure the fees are low or non existent. This is the easiest form of debit consolidation that you can pursue, and it’s probably one of the most effective. Eliminating the interest that you’re paying on a credit card makes the payment that you are making that much more effectively. Think about it – a credit card at 10% interest (and that’s fairly low) with a $10,000 balance costs you almost $100 a month. If you transfer the balance onto a zero percent interest promotional card, you’re buying yourself another $100 per month. Multiply that by two or three cards, and you’re talking real money. It’s debit consolidation at its best.

Using your HELOC for Debit Consolidation
This is only something you should pursue if you’re willing to change your spending habits for good – and I mean you’re absolutely dedicated to it. Using your home equity line of credit as a debit consolidation loan can save you some significant money, but also put you at significant risk. What you’re doing is transferring unsecured, high-interest debit into a lower interest, secured debit. This is known as securitization. Remember, when you do this you’re agreeing to sell the asset that you have secured your debit with in the event that you can’t repay the debit. In the case of debit consolidation with your HELOC, that means your house! You can see where this can get very, very dangerous. Think about it – it shouldn’t taken lightly.

Debit Consolidation Companies
This is a company that SHOULD help you negotiate with your lenders for lower rates, principle relief, and repayment plans. I say should, because they don’t always do so. Look for a lender that will work with you on a plan that you’re comfortable with. Don’t be afraid to ask questions, and make sure you understand everything that’s going on before you commit to any courses of action.

Is a Debit Consolidation Loan Right for You?

One of the most upsetting circumstances in a persons’ life is finding yourself weighed down with debit, to the point where you feel you’ll never get it paid off. Recent reports have shown that the number one issue in troubled marriages is money, and the number one money issue is too much debit. Frequently, marriage counseling professionals find themselves becoming proficient financial advisors due simply to the amount of exposure they have to the issue.

When visiting a debit councilor, expect to be overloaded with questions about your financial situation. They will attempt to find out all your debits, your income, your spending habits, you savings, and compile a complete picture of your financial situation. If you’re not honest with them at this stage in the debit consolidation program, you will never see the results you’re looking for as their plan for a debit consolidation loan will be based un unrealistic income, debits, or both.

Once all these data are on the table and the debit councilor can make some basic calculations, they will tell you what your total payback amount will be, including interest, and how many years it will take you to accomplish it. They will look at where you’re spending your money, and find ways to streamline your expenditures so you can focus some more of your income on paying down your debit. They’ll also look at some debit consolidation loan programs to determine if you would benefit from them or not.

In some cases, a debit consolidation loan isn’t the best answer and will be more costly than simply paying off the debit as it currently exists. This is often the case with secured debit that has a relatively low interest rate. The only benefit a debit consolidation loan will offer in this situation is one lender to whom you must submit payments, and with associated fees, a debit consolidation loan may even cost you more than your current situation.

However, if the debt counselor believes that may benefit from a debit consolidation loan, he or she will begin speaking to all the companies that you owe money to in an attempt to negotiate a decreased payoff amount. A good debit consolidation loan councilor will pass some of these savings on to you, so work closely with them at this point to maximize your benefit.

As a side note, expect the credit card companies to offer lower APRs if you keep your balance with them. They’re making money off the interest that you pay, so it is in their best interest to keep your balance on their accounts. If you do want to keep nay of your credit card balances, maximize this opportunity.

Now, if you decide to keep some of your balance with a credit card company instead of completely utilizing a debit consolidation loan, you need to make sure that everything they agree to is in writing. Many credit card companies and debit collectors are somewhat dishonest and will be happy to get in you in worse trouble than when you started.

There is much to think about before you make a decision about how you are going to solve your debt problems. A debit consolidation loan may be the right answer, but nothing will change down the road unless you learn to live within your means.

What is Debit Consolidation?

Debit consolidation is the practice of taking many loans and combining them into one, lower interest rate loan. This can be done to lower payments or simply to gain the convenience of dealing with only one company when making payments.

Debit consolidation can involve either secured or unsecured loans. In some instances, the borrower uses their house as collateral to combine many unsecured debits into a lower interest rate secured loan. This is referred to as collateralization. Keep in mind, when you take this route to consolidate your debit, you are legally obligated to sell the collateral if you cannot pay back the loan. This is commonly referred to as foreclosure.

In other scenarios, a debit consolidation company will buy at-risk debit from the lending company at a discount. A good debit consolidation company will attempt to pass some of these savings on to their customers. Unscrupulous ones will not.

Often, companies will attempt to charge very high fees when offering debit consolidation loans - sometimes the maximum allowed by the state. Be wary of these companies, and also avoid waiting until the last minute to consolidate your debit. You may not have time to shop around to find an honest company and be forced to accept usurious rates from a predatory lender.

The basic rules of debit consolidation are simple: don't wait till the last minute and don't use something as collateral that you can't live without.