When you find yourself overwhelmed by debts, consolidated credit could be your only alternative, but before you rush into any agreements, it is important to know exactly what your options are and identify the one that is more suitable for your needs.
Credit or debt consolidation involves combining all your debts into a single monthly payment. Usually, the best way to do this is through a loan with a monthly rate lower than the sum of the rates it is meant to consolidate. Learn more about http://www.toptenreviews.com/money/debt/best-debt-consolidation-companies/.
The lower rate is obtained either from the difference in interest (if the interest for the consolidation loan is lower than the interest paid for the other debts – this is rarely the case, since early repayment penalties may apply to the old debts) or by extending the repayment period.
Before applying for a consolidated credit loan, you should carefully analyze the costs of repaying the debts, the cost of the new loan and your ability to keep up with the monthly rates. In some cases, these loans have to be secured against properties, or, especially if the borrower has bad credit, are very expensive.
Another solution to consolidate and manage old debts is to hire a credit counseling company. In exchange for a small fee, these companies help you assess your financial situation and negotiate a debt repayment plans on your behalf. Every month, you send the agreed amount of money to them, and they repay your debts to your creditors.
In order for this solution to work, you need a reliable and reputed company that will not charge too much for their services and will be able to negotiate better terms with your creditors. With their services, you would not be talking about consolidated credit, but rather about credit counseling or credit management.
If most of your debts come from credit cards, you may be able to find a convenient offer for credit card consolidation. This would mean consolidating all your credit cards under one contract. In order to accomplish this successfully, it is important to pay attention to details such as interest, administration and transfer fees and commissions, early repayment fees.
Also, cancelling your old credit cards will most likely damage your credit score, so, before taking this step, think about whether you plan on taking other loans or venturing into activities that could be influenced by your credit score. You could keep your old credit cards in order to avoid damage to your credit score, but only if you are sure you will not use them and accumulate further debts.
The best way to identify the right consolidated credit solution for you is to discuss with a reliable credit counselor or lender, and to analyze the impact each of the above presented solution would have on your financial situation.