Best Debt Consolidation Programs
A lot of people find themselves with overwhelming debt due to unexpected bills and expensive life events. The average American has about $5,047 in credit card debt. Over time, you end up having several loans and it becomes quite tricky tracking them all. The overall debt can lead to one declaring bankruptcy or in danger of insolvency. Overcoming this may be quite daunting considering high monthly payments and interest rates. This is where debt consolidation comes in.
Debt consolidation puts all your debts into one loan; this allows you to only have a single payment to make every month. You can comprehensively manage your money as all your debt obligations would be streamlined. Debt consolidation should not be confused with debt management. Debt consolidation involves taking out a new loan to pay off your debts. On the other hand, debt management involves negotiating for an affordable payment with the companies or creditors you currently owe.
Best Debt Consolidation - How it Works?
Debt consolidation loans allow you to move all your eligible debts or a significant amount of them, into a single loan. You can then close down previous loan arrangements and various credit cards debts you had and pay one single loan to your new loan provider.
It is, however, important to note that these loans may negatively affect your credit score. Nevertheless, they may lower your interest rate, reduce your monthly payment and reduce the stress you would have had due to the multiple financial obligations.
You can consolidate a variety of debts. The common types of debts that can be consolidated include:
- Personal loans- Most people either have two or more separate personal loans. With the tough economic times, it can be difficult to keep up with monthly repayments. A debt consolidation loan allows you to combine these loans and have a single loan with a lower interest rate or fees.
- Credit card debt- Credit card debt can be easily consolidated to give you the flexibility to pay off your outstanding balances.
Other types of debt you may be able to consolidate include private loans, utility debts and charge card debt.
Best Debt Consolidation - Are you Eligible?
While debt consolidation works for some, it may not be the right option for everyone. When should you consider debt consolidation?
- When you're struggling with your monthly repayments. If you have multiple credit cards and nearing your credit limit or you've already reached your limit, debt consolidation may be for you. It reduces the number of repayments and makes your debt easier to manage.
- Equity in Your Home. Debt consolidation is a viable option for people struggling to keep up with a high-interest rate on their home loan.
- Not Reducing Principal. If you aren't reducing your principal as the amount barely covers the interest, debt consolidation may work for you as it lowers your interest rates and the amount you are required to pay.
Before choosing a debt consolidation company, it is important to first find out how much credit card debt you're looking to consolidate. For you to qualify for a large consolidation loan, you must have good credit. Ask the provider of the required qualifications to avoid wasting time on applying for a loan you do not qualify for.
Best Debt Consolidation Companies: What to Consider
Choosing the right provider for your debt consolidation is crucial. There are factors that you should always take into account when deciding on a provider. They include:
1. Fees Charged
Every debt consolidation loan provider has a set fee he charges for the debt program. Try and find out the amount each provider charges for setting up and maintaining a debt management program.
Reputation is essential when choosing a provider. A reputable company is also registered with either The Association of Independent Credit Counseling Agencies or The National Foundation of Credit Counseling. Do your research and don't just fall for their name or colorful website.
3. Customer service
You should be able to openly discuss your options with a debt consolidation provider. The provider should also be open and wiling to answer any questions you may have regarding this kind of loan. Always choose a provider who puts the customer's needs first and is always available to offer support when you need it.
4. Additional services
A provider with additional services such as debt management and debt counseling helps you manage your finances in future to avoid falling back into debt again.
5. Accreditations and certifications
A reliable provider should have reputable accreditations from renowned organizations like the International Organization for Standardization (ISO) and the Better Business Bureau (BBB).
6. Is it a profit or non-profit?
A non-profit provider charges lower fees compared to a for profit provider. Keep in mind that the non-profit company still has to run their business and some charges may apply. Some companies claim to be non-profit when they are really not non-profit. Ask to see a certification of proof before settling on one given company.
Before deciding on a specific company, ask the terms they'll be offering you if you signed up with them. If the terms are longer, you may end up paying twice as much. In addition, remember to ask if the loan attracts a variable or fixed interest rate and if this loan will save you money in the long run.
Risks Associated with Debt Consolidation Programs
Debt consolidation only works if you are paying less in interest and in the total amount. However, there are risks associated with this kind of loans. These risks may include:
- Additional overall cost as you may end up with lower repayments over a long period of time. The amount increases as you're still paying interest for the whole repayment period.
- There can be hidden charges for late payments, default payments, and even alterations. Some even charge for paying off your existing loans early.
- High charges by the debt consolidation companies.
- You may end up losing your home if you leverage your home's equity to consolidate credit card debt at a reduced interest rate.
The Best Debt Consolidation Companies
Finding the best debt consolidation company is important. There are several programs which provide value in terms of their service provision and reputation. The top companies include:
- An ISO registered agency
- Over two decades of experience and expertise
- Credit counselors are certified
- A range of additional solutions
- Availability of a free consultation
- Enrollment and monthly maintenance fees
- Client Services are only available from 9am-5pm
Having helped over 5 million people, Consolidated Credit is an established debt and credit counseling service. With over 20 years of experience in this field, Consolidated Credit provides access to a range of services geared towards helping those with debt and financial issues. This provider allows for consolidation of a variety of debts including unsecured debt. In addition, they offer some services for free including a debt analysis with the expert. Their main focus is to use debt consolidation, to enable individuals reduce their monthly earnings and cut back on the amount of interest they are required to pay to creditors. Consolidated Credit also provides other services such as debt management, credit counseling, housing counseling, personal finances advice and credit card debt solutions.
Freedom Debt Relief
- 24/7 customer service on the web
- Large trustworthy company
- Track record of success
- Transparent business practices
- Available in 32 states
- No live chat
- Not available in every state
Based in San Mateo, California, Freedom Debt Relief helps clients enroll in debt management programs. To help you manage your debt, the company assesses your liability and negotiates with creditors on your behalf after coming up with a savings plan. The provider has qualified counselors who are able to work with you on a one-on-one basis. They also provide a variety of tools geared towards making money management easier. Freedom Debt Relief focuses more on debt relief over debt consolidation. This means that they only charge a percentage of the money you save on your debt repayment program instead of charging you on a monthly basis. In the event that you are not satisfied with the outcome, the provider offers a money back guarantee. Furthermore, they work with a third-party management company and they can refer you, if you would prefer a debt management plan.
National Debt Relief
- An experienced and established provider
- Offers access to a range of tools and resources
- Provides services from expert counselors
- Contacts creditors to cease communication with you
- Enables you to avoid bankruptcy
- They use a third party provider for debt management
- Charged a percentage of the money you save
If you have debt that you cannot manage on your own, National Debt Relief can help. They offer free debt relief quotes to individuals struggling with debt. Based in New York, the company works to reduce business debts, repossessions, balances owed on credit cards debt, medical bills and any unsecured debt. Their main emphasis is on helping people avoid having to declare bankruptcy. National Debt Relief has expert counselors who work with clients in order to find a suitable program that will make money management easier. This provider is more focused on debt relief over debt consolidation. If you would prefer a debt management plan, they can refer you to a suitable plan as they work with a third party management plan.
- An established provider with expert counselors
- Offers a range of tools and resources
- Works with clients to find the most suitable solution
- Site has helpful debt calculators
- Offers financial education programs
- There is a monthly service fee
If you are looking for an established provider with expert counselors, DebtWave is a perfect choice. The provider works with clients to come up with a comprehensive solution which includes a debt management plan as well as debt consolidation. DebtWave's main aim is to reduce monthly debt repayments to a manageable level, as well as reduce the amount you are required to pay in interest. If you made a late payment, this provider liaises with creditors to try and eliminate the charges that may have been applied to late payments. Additionally, they also negotiate with creditors to reduce the interest charged in debts. Having been in the business since 2001, DebtWave offers financial education programs and credit report evaluation that go beyond debt consolidation. Clients with unsecured debt can reduce the amount of payments to just a single one. DebtWave has a monthly service fee that is included in a single payment that you make to them.
- Flexible payment schedules
- Reputable service
- No hidden fees
- Competitively priced
- No Cons
CuraDebt was founded in 2000 by a team out of California that wanted to open up financial debt solutions to individuals and businesses across the nation. They offer solutions for people struggling with both IRS tax debt and personal unsecured debt that could come from sources like medical bills and credit cards.
Advice for Finding the Best Debt Consolidation Options
Before you start shopping for a debt consolidation company, make sure you are well-versed in the finer points of the industry. Learn about a variety of important topics such as:
- Questions you should ask before consolidating. Before you choose to consolidate, maker sure you know the important questions you should ask.
- How to think about your debt repayment. If you are struggling to repay debt, take a look at these mindset shifts that can help motivate you to tackle debt.
- How to start consolidating debt. Take a look at this beginner's guide to consolidating debt to learn the steps it takes to combine multiple debts.
Top Debt Consolidation Companies Recap
Debt consolidation is a great way to get out debt within a given amount of time. Carefully review your current debt before applying for a loan. Ask the experts if you have any questions and only get a loan for the right reasons.