Getting into debt is easy enough, but finding legitimate and reasonable ways to get out of it takes some effort. Sometimes, things go wrong beyond your fault, such as medical bills, which leave you with large debts. You have been looking around for a solution to get out of debt, and you have learned about professional debt consolidation companies. Now you are wondering if that is a good idea. Here are some essential things you need to know before you get serious about it.
The Promise
Debt solution companies make several promises to lure in their customers. They promise to:
Lower your monthly payment.
Lower your interest rate.
These two factors alone are enough to attract many people. The problem here is that they are not revealing the whole picture — they are indeed consolidating your debts into one. This type of consolidation is for unsecured debt such as credit cards, personal loans, payday loans, and medical bills.
The Reveal Failure
The things that they are not likely to tell you are also two-fold. They include:
- A lower monthly payment does not reduce the total amount you owe. It means that you will now be in debt longer – and you will end up paying more.
- A lower interest rate sounds great. But in the end, you will still be paying much more than you would have paid if you kept up your payments. Unfortunately, there also is not a real guarantee that you will be able to get or keep the lower rate after you apply. It may change over the life of the new loan.
Once it is over, you will sadly have learned that using debt consolidation services has likely ended up costing you thousands of dollars more. Yes, you will get lower monthly payments, and this can give you some breathing room and a little less stress, but now it will take longer to pay off the debt.
Dealing with Creditors
If you fear being hounded by debt collectors or realize that you cannot keep up the payments, you can and should contact each of them. Explain your situation and ask them if they could lower your payments temporarily. It will produce even better results if you can tell them about when you expect to get back on your feet financially. Many companies will do this for you, but remember that they are not obligated to do it.
Some Alternatives
There are some other ways to help you get control of your finances. You may seek to get a new balance transfer card that will have low or zero interest for several months or a personal loan, which may be able to give you a lower interest rate than your credit cards.
A Better Solution
The best thing you can do when you find it challenging to make ends meet is to tackle your debt. Debt settlement companies can cost you even more financial problems, so stay away from them altogether. Most of them are just scams.
Tackling your debt in the best way is to contact your creditors first – as mentioned above – and then buckle down and start reducing your overall debt as soon as possible. This means cutting back on all unnecessary expenditures and setting up a budget.
If more income is needed – get it. It may mean taking a part-time job temporarily, selling unneeded stuff, creating things to sell online, or finding other ways to make money. You can get out of debt, and the sooner you do, the more you can enjoy life.