If you feel as though you are drowning in a sea of unpaid bills, you may want to consider debt consolidation. Debt consolidation loans may reduce your interest rate and allow you to become debt-free sooner. Debt consolidation is also convenient because you typically make one payment each month rather than sending separate bills to different creditors. There are certain requirements necessary before a company will agree to consolidate for you.
Credit Counseling
The National Foundation for Credit Counseling (NFCC) says it is the job of a credit counselor to offer money management advice, provide solutions to your existing financial problems and create a customized plan that will help you avoid future credit problems. A credit counseling agency will typically have minimal requirements that you must meet before they agree to work with you.
Qualifying Requirements
The basic requirements to qualify for debt consolidation include a regular source of income and at minimum two accounts with outstanding balances that total at least $2,500 in unsecured debt. Consolidated Credit Counseling Service (CCCS) says common examples of unsecured debt include credit cards, legal and medical bills and department store cards.
Interest Rates on Consolidation Loans
A credit counseling agency can determine if you qualify for a lower interest rate through your existing lenders on a debt repayment plan. If so, your various accounts would be closed and the balances would be grouped together into a single monthly payment that would be paid to your credit counseling agency. In return, the agency would assume responsibility for making individual payment to your creditors.
Solution
The NFCC says most times credit counseling agencies can stop any legal action taken by your creditors and come up with a repayment plan that is acceptable to all of the parties involved. If you keep up with your payment arrangements, creditors generally stop making payment demands.
Home Equity Loans
If you are a homeowner you may be able to obtain debt consolidation loans by taking advantage of the equity (the difference between how much the home is worth and how much you owe on the mortgage) in your home. According to DebtSteps.com refinancing your mortgage will give you access to the equity you have. These funds may be used to pay off your outstanding bills.
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