Credit is more readily available today than ever before. This makes it convenient to purchase some items instantly that consumers perhaps may have had to wait months for previously, but there are some disadvantages to today’s easily accessible credit. Many people find themselves overwhelmed by multiple credit card bills and are unsure how to solve their dilemma. Additionally, recent laws have required companies to charge higher minimum monthly payments. Bankruptcy laws have also become stricter, leaving many borrowers with the feeling that they have no option but to declare bankruptcy. Debt consolidation may be an alternative to bankruptcy and could help to relieve some of the burden of multiple monthly payments.
Before applying for any debt consolidation program, there are a couple of steps you can take to determine your financial requirements. The first step is to gather all those bills that you may wish to combine and make a list of the interest you are being charged and the monthly payments you are making. The second step is to access your credit report. By law, you are entitled to annual credit reports from each of the three credit reporting agencies. Your credit report contains information such as contact information for the companies that you are making payments to and how many times your payments have been missed or were late. Combine the information gathered from your bills and your credit report to determine how much money you owe, how much your monthly payments are in total, and what your payment record is.
It is advisable to purchase your credit (FICO) score at the same time that you obtain your credit report. This is generally available from the same sources that provide you with credit report for a small fee.
Once you have gathered this information, it is time to contact consolidation companies. It may be prudent to research several companies to determine which one can offer you the best consolidation package for your needs. Your local Chamber of Commerce, banking institutions, the Better Business Bureau, the Yellow Pages and the Internet may all be useful sources of information for finding companies that offer consolidation programs. Other sources of information could include acquaintances or friends who have had dealings with such companies or your local church.
It may be advisable to research companies thoroughly before choosing one. Remember that choosing a consolidation company to combine your bills is a financial commitment. A reputable company will negotiate with your creditors on your behalf to reduce interest rates, obtain a longer repayment plan, and reduce any associated fees. By doing thorough research you may have a better chance of finding a company that will deal fairly and respectfully with both you and your creditors.
Consider interviewing potential consolidation company representatives the same way you would someone for a job interview. Remember, the representative that you choose will be working on your behalf so it is important to choose wisely. Ensure that the work they intend to do for you and the results that they hope to achieve are clearly explained. It is also advisable to ask for a written, detailed description of the fees they will charge you. You may also wish to ask them to provide you with a breakdown of their fees to determine how much of each monthly payment will go directly to your creditors and how much will be fees charged to you by the consolidation company. Once the company has negotiated the terms of consolidation with your various creditors, you should receive a copy of those terms. This should state how long it will take to repay your debt under the conditions agreed upon.
An effective consolidation program will usually provide education programs to teach borrowers to manage their debt more appropriately in the future. You may wish to ask the company that you are considering what programs they offer. It is suggested that courses on the careful use of credit and how to budget wisely should be made available.
Consolidation programs will often require you to discard all or some of your credit cards. While this may be a hard step to take, it could help you to discover that you do not need them after all. If you do your research and follow the guidelines set out by the consolidation company, you could be well on your way to future freedom from overwhelming debt.