Consolidation of debt is an appealing strategy for simplifying and managing debt that can be otherwise overwhelming, but it is important to understand the processes. Consumers should also attempt to understand not only the benefits of consolidation of debt and the processes which should be followed, but also the pitfalls of using long-term loans to consolidate their debt and the best methods to follow to avoid further indebtedness or defaulting.
One of the best ways to consolidate debt is to go through a debt consolidation company, though it is always best to go through a debt consolidation company, a consumer can consolidate their own debts if they have the time and means to do so. Although debt counselling is the most effective way to get out of a debt ditch, not all consumers are willing to undergo the process and prefer to try consolidation of debt first.
The first step in consolidation of debt should be negotiating with creditors. By explaining to a creditor that you are unable to meet the current payments, but that you are willing to negotiate new terms, an honest and frank dialogue about your financial situation has been established and most creditors will be willing to work out an agreement or give a small grace period. Once all your creditors have been informed of your financial situation, seek out a loan that will help you close these accounts as soon as possible. Creditors are willing to negotiate a settlement amount with reduced interest.
Secure a loan with an asset as this will have the least risk, and provide a better interest rate and repayment terms. Transferring your credit card balance to a card with lower interest can also help alleviate monthly debt expenses.
Consolidating your own debt can only be done if the consumer has a good credit rating. If you see yourself heading for a slippery debt slope, act fast and consolidate your debts before your credit rating necessitates the services of debt counsellor.