Best Ways to Choose the Right Debt Consolidation Program

When your monthly bills keep mounting, they soon become a nightmare.

If you have many bills to pay, the confusion is which one to pay first?

Wouldn’t it be nice to have all the statements in one and have to pay just one bill?

Many people who have similar problems have turned to debt consolidation, where they need to make only one payment. In other words, they have found means to pay all the bills in one go.

Sounds fantastic, and it isn’t wishful thinking.

But how do you get such a large sum to pay off all your bills in one shot?

That’s what consolidating your debts is all about.

It would benefit if you first understood what debt consolidation is before going any further.

What Is Meant By Consolidation of Multiple Debts?

Simply put, debt consolidation is a master plan that lets you combine all your high-interest bills (credit card debt) into one payment, that too at a much lower rate of interest. A well-strategized plan will help you clear all your debts in 3 to 5 years.

The sole purpose of a consolidation plan is to take care of multiple credit card payments, all of which are consolidated into one payment each month. It makes your financial burden easier because of the lower interest rate, which helps reduce your monthly bills and lets you get out of your debt trap quickly.

What’s The Best Way to Consolidate Your Debt?

There are several ways to consolidate all your bills, like enrolling in a debt management program, seeking a debt consolidation loan, opting for debt settlement. If there is no other go, filing for bankruptcy is the only option.

Your current financial situation will decide what plan you choose; whichever option you choose, you need to be aware of the implications. A typical debt consolidation plan will offer the following:

  • Free advice and consultation
  • Negligible amount as fees, or no fees at all
  • No adverse effect on your credit score
  • Easy Enrollment Terms
  • Freedom from Financial Stress
  • A plan to clear your debts in 3 to 5 years

Here are some ways to choose the right debt consolidation program:

1. Availing of Counseling Services

Availing counseling services from a credit counseling service helps as they are professionals who work with your creditors and negotiate more straightforward terms on your behalf. They may push for lower interest rates and monthly payments.

Usually, the first such reduced monthly payment is made to the counseling service, which pays it to the creditors on your behalf. You may have to surrender all your credit cards, save one for making actual payments. Plan your expenses and go on a frugal budget, which helps you clear all your debts within 3 to 5 years.

You can choose a debt management program, but you need to prove your eligibility by qualifying based on your income before you do that. If you can prove that you have sufficient funds at your disposal to take care of your recurring expenses, you qualify for enrollment.

However, if your income is insufficient to handle your expenses, your counselor may suggest debt consolidation as an option or even filing for bankruptcy, which is the last option.

2. Advantages of Credit Counseling

  • There are several nonprofit credit counseling companies you can reach out to
  • Debt management programs are suitable for consolidating credit card debts, as the goal is to reduce interest to make payments more manageable.
  • Credit scores are not considered while evaluating whether you qualify.
  • No minimum monthly payments are stipulated. Every payment you make will reduce your debt, which you can clear in 3 to 5 years.

3. Borrowing from People Close to you

The other option is to reach out to your friends and family to help you consolidate your debts and pay them off. You can then think of ways and means to pay off your friends and family over a period without any interest being charged. The possibility can work out only if you have someone with liquid funds and willing to pull you out of your financial mess.

If you have someone you can turn to, it is good to reveal information like the extent of your debts, your current budget, the monthly payments you can manage, and the current interest you pay, etc. If you can establish that you can pay back the money you borrow by being frugal, you should be able to swing it in your favor.

Summing it Up

Getting caught in a debt trap is horrifying. However, if you can think smart and plan your finances, it is easy to pay off your debts and come out of any financial mess you are in now.

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About FinanceGAB

Ajeet Sharma is a financial blogger and I am blogging since 2017. Financegab is a personal blog dedicated to personal finance. The main aim of this blog to help people to make well-informed financial decisions.
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