Debt Consolidation Loans

If the idea of taking out a personal loan and using it to pay off your other debts sounds good to you, you're not alone. These days, millions of Americans obtain what's known as debt consolidation loans to tackle their multiple unsecured debts such as credit card bills, medical bills, or student loans. The goal is that instead of having multiple bills to pay each month, all you need to do is to make just one lower monthly payment. While debt consolidation loans can lead to overall savings and the convenience of having only bill to take care of, we advise that you always proceed with caution.

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Like other methods of debt relief such as debt management or even settlement, taking out a loan to pay off other bills is also fraught with risks, hidden fees, and it probably won't help consumers who have a hard time curbing their spending.

In some cases, when you take out a personal loan and use the funds to pay off your other bills, you may end up paying more. For people with good credit, interest rates between 11 to 15 percent are common; however, if you have bad credit or too many debts, you may be looking at possibly 19 percent or more. Establishments like Bank of America and several of the country's biggest lenders usually advertise low-rate personal loans to people with good credit, but if yours is less-than-perfect, we advise you keep shopping around for a lower-cost loan. You also need to worry about any upfront fees that your lender might charge. If possible, find out about using tools like a loan calculator or software to help you make an accurate assessment of how much you may end up paying and for how long.

Another area of concern with debt consolidation loans is that, in some cases, people who take out a personal loan end up running high-interest credit card bills all over again. So now they have big credit card balances PLUS a loan. Also, if you default on your payments and you used your home to secure a loan, you may end up losing your home. For these reasons and more, we usually advise people to always consider all their options before signing up with a debt relief service or obtaining a new loan. It's also a good idea to seek the guidance of financial experts and reputable companies that specialize in helping consumers like you manage and control their debt situation.

Other Debt Relief Choices

Some people have found success with other methods of debt relief, such as debt consolidation or a debt management program. Under a debt management program, your unsecured debts will be consolidated into one monthly payment that will be made to a credit counseling agency. In many cases, once they have a clear picture of your finances, the credit counseling agency will put you on a manageable and affordable repayment plan that you can adhere to each month. No matter which debt-relief service or company you may consider, we can be a valuable resource to you by providing a fast and convenient way for you to request a free debt relief analysis and savings estimate at no obligation.

Explore your debt relief options. Request a free debt relief estimate and savings analysis, at no obligation to you.

Debt Settlement

As you do your research about debt relief services, you may have even come across offers that sound like this, "We can help you cut your debt in half!" Such offers may be tempting to someone who is desperate for a way out of debt, but sometimes, in the hands of the wrong company, they are more hype than help. Debt settlement (or debt negotiation) is, indeed, a perfectly legal solution to resolving your debts. In fact, it is one of the most widely used methods of debt relief because it does offer many consumers a way to be completely free of debt typically in two to three years. Under a debt settlement program, creditors will agree to forgive or settle your debt for substantially less than what you owe. Debt settlement companies will usually advise their clients to stop making payments and instead, save up money that they can use to negotiate a one-time, agreed-upon payment (the settlement).

Just as a debt consolidation loan or a debt management program, there may be pitfalls when you try to settle your debts. For one, consider the fees. Just how much will you pay for having a debt settlement company do the work for you? Debt settlement may be rather expensive; some debt settlement companies charge approximately 15% of the total value of the debt you want settled, while others may charge a percentage of the debt savings once you settle.

The good news is, thanks to new laws, unless you are working with an "attorney-based" debt settlement company, you should not have to pay ANY SETTLEMENT FEES, until your debt is successfully settled! That is a significant benefit to consumers who, previously, were often forced to pay initial fees to settlement companies BEFORE any settlement occurred.

With debt settlement, your credit score typically will be impacted. Negative marks may continue to hit your credit score until creditors get their settlement which means your credit will continue to decline until you save up enough money to negotiate the settlement. Some creditors may even send threatening letters and even threaten to sue you to collect the full amount that you owed. Consider that with bankruptcy, your creditors will stop their collection efforts as soon as you file. Not so with debt settlement. Here's something else to think about: the Internal Revenue Service might consider forgiven debt to be taxable income. In some cases, that amount can push some people to fall back deeper into debt simply because they did not consider the tax consequences.

In spite of the potential drawbacks of debt settlement, many consumers - especially those who are truly facing hardships because of their bills - still consider it a viable option and are willing to pay for whatever reduced amount they can settle with their creditors.

Knowledge Spells Savings

But no matter which method of debt reduction you choose - whether it's taking out a debt consolidation loan, a debt management plan, or even settlement - it pays to be an informed consumer. We can help you explore all your debt relief options. It only takes a moment to request online your free debt relief analysis and savings estimate - at no obligation.