Northeast OH Debt Consolidation
Understanding Debt Consolidation
Debt Consolidation Companies
Let’s talk about debt consolidation companies. These are companies that charge you a monthly fee to ‘settle’ your debt. They get you to sign a contract and then tell you not to worry and that they will make your debt go away if you just pay them. What they don’t tell you is that the monthly payment that you send them is accumulated for their fee first and then they start saving the funds to offer a settlement to your creditors.
Your creditors are not patient enough to wait for months to get any type of funds or settlement. So, now you are being sued by your creditors who have not heard a word or seen a dime in months. You call the company and they tell you that they cannot help you as they are not lawyers. Now, you are out maybe thousands of dollars you could not afford to lose and being sued. This is not a good option to safely and efficiently get out of debt.
Should You Get a Consolidation Loan?
What about a consolidation loan? So, now you go through a company and take a loan that is supposed to allow you to pay off all your debt and only make one payment a month. You take the loan and hopefully you can get enough to settle your debt. However, you now have a large monthly payment at a high-interest rate. While this type of loan can be helpful you are simply trading one debt for another.
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Debt Settlement Agencies
There are a few not-for-profit debt settlement agencies. These are companies that work a settlement deal with your creditors and you make a monthly payment to them with a small monthly fee attached to pay the company. These companies evaluate your monthly budget an make sure that you can afford the settlement plan and require the plan to pay off all of your unsecured debt within a 5-year period. The one I am aware of in this area is Apprisen. If you have the monthly cash flow to support a true debt settlement plan this could be a viable option to get you out of debt.
An attorney can also help you to settle your debt by making offers to your creditors until you reach a number that you can pay and they will accept. Usually, this is best accomplished if you have a lump sum of cash from say an income tax return or liquidation of an asset. The process can take up to 6-8 months but you can settle your debt for half the amount owed or less. This also shows on your credit report as ‘settled’ debt instead of written-off debt.
Now that banks are loosening up credit there are many ads for equity lines and consolidation loans. These can be helpful in certain circumstances but generally, you are financing unsecured debt onto your house making it secured. So credit card and medical debt are not secured by an asset you own (unsecured). Your car loan and your mortgage are secured by an asset you own (secured). If you take an equity line of credit or a secured consolidation loan then you have made unsecured debt tied to an asset you own. Meaning that if you cannot pay that loan, the bank can foreclose or repossess the asset and you still have to pay the debt. This is a very bad situation and should be avoided 99% of the time.
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