compare, debt, consolidation, debt, settlement
Debt is a problem that plagues millions of Americans. However, using the wrong debt solution can be just as damaging to your finances as the debt itself.
Steps For Determining If Debt Consolidation Is The Best Option For Your
Determine how much unsecured debt you have. You can do this by requesting a copy of your credit report from one of the three main credit reporting agencies, or you can access your credit report online via one of the many online credit monitoring companies like Experian or MyFICO.;
Determine if you qualify for a debt consolidation loan. This process will involve contacting a few different debt consolidation agencies and reviewing their qualification requirements. In most cases a debt consolidation loan will be set up as a home equity loan, and therefore to qualify for the debt consolidation loan you will need to own your own home. Other qualifications may include minimum FICO score, employment, and minimum monthly income.;
Determine how much you will be saving by using a debt consolidation loan as opposed to paying your credit cards’ minimum payments. You can ask the debt consolidation loan company to give you a quote on how much they can save you.;
Determine if you can afford to make a larger mortgage payment. To figure this out simply take your monthly income, subtract your food, transportation, and insurance costs. Next see if you have enough money left over to pay a mortgage payment that includes the home equity loan. If you don’t have enough money to cover the larger mortgage payment then debt consolidation is not the right debt solution for you. If you do have enough money to cover your mortgage payment and the home equity loan payment then go on to the next step.;
Determine if the benefits of debt consolidation outweigh the cons of debt consolidation. The pros for debt consolidation include: lower overall monthly payments, reduced interest rates for your transferred unsecured debt, you only have to make one payment instead of many, and you can write off the interest. The cons for debt consolidation include: it will take you longer to pay off your debt, you may be tempted to start running up the balances on your credit cards again, you will spend more money in interest over the life of the loan, and your home is used to secure the loan and it can be taken from you if you can’t make your payments.
Steps to Determining If Debt Settlement Is the Best Option For You
Determine how much unsecured debt you have by requesting a copy of your credit report.;
Determine if you have the money to use debt settlement as your debt solution by taking your monthly income and subtracting your normal living expenses like housing, transportation, utilities, food, and insurance. If you have money left over after these expenses then debt settlement may be right for you. If you don’t then debt settlement is not right for you.;
Determine if you qualify for debt settlement service. Generally speaking companies that offer debt settlement services only work with people who have total debt balances that exceed $7,500. In addition to debt balance requirements other requirements may need to be met as well. Read through the information provided by the debt settlement company to see what other requirements they have and make sure that you meet all of these requirements.;
Search for a debt settlement company. If you feel that you qualify for debt settlement services then your next step is to find a debt settlement company. Don’t simply sign with the first company you find. Instead read through what services they provide and what they expect from you. Look for companies that have been in business for a while and that have been approved by the Better Business Bureau.;
Determine if debt settlement is right for you by comparing its pros and cons. The pros of debt settlement include: you can reduce the total amount you owe, you can improve the relationship between you and your creditors, and it will help you to pay off your debt quicker as long as you remain faithful to the settlement offer. The cons of debt settlement, on the other hand, include: potential tax problems, it may hurt your credit rating, it may encourage your creditors to initiate law suits against you for the debt in question, and it may actually increase the frequency of calls to you by your creditors.
Steps for Comparing Debt Consolidation and Debt Settlement
Compare short term benefits of each debt solution option.;
Compare long term benefits of each debt solution option.;
Determine which option is best for you based on which program you qualify for, which one offers the best overall benefits, and based on which program you can afford.
Utilize free trial offers from online credit monitoring sites to gain free access to your credit report and your FICO score.;
Don’t sign with any company without examining all of your options.;
Contact a local social services agency for advice and recommendations on debt solutions.
Don’t use a debt settlement or debt consolidation company that requires huge upfront fees.;
Don’t believe all the claims made by a debt consolidation or debt settlement company.
Better Business Bureau can be found at http://www.bbb.org;
A report on debt solutions can be found at the Federal Trade Commission at http://www.ftc.gov/bcp/conline/pubs/credit/repair.htm