How to consolidate debt — and entirely eliminate it

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By Dzhingarov

With so much debt on your shoulders, it’s easy to lose sight of what’s really important. You’re tethered to your debt repayment commitments each payday, with no money left over to put aside for the future.

Desperate circumstances need the use of desperate tactics. Many people opt for debt consolidation, which entails taking out a huge loan in order to pay off all of their current debt.

Having stated that, how exactly will ADDING ANOTHER debt help?

The advantages and disadvantages, as well as how to identify a reputable organization that can assist you, as well as how quickly you can get out of debt, will all be discussed.

Because there are a plethora of fraudulent consolidation services available. These “companies” will promise that their loan packages will assist you in getting out of debt quickly…

… only to take advantage of you with hidden fees, exorbitant interest rates, and lengthy loan periods.

The difficulty here is to sort out the legitimate debt consolidation companies from the fraudulent ones.

Locate a not-for-profit debt consolidation organisation

Non-profit debt consolidation organizations are 501(c)(3) organizations that assist you in consolidating your debts, providing credit counseling, and even negotiating with your creditors on your behalf.

The best part is that they do so at little or no expense to you, as they are sponsored through third-party donations and grants.

Regrettably, even scammers and substandard consolidation services operate on a non-profit basis. As a result, you’ll need to conduct a study to pick a respected one.

Two telltale signals that a non-profit debt consolidation organization is legitimate:

Fees. A reputable non-profit organization will almost certainly charge monthly maintenance fees. Fortunately, they are pretty inexpensive – and if you are truly in need, some non-profits may forgo the expenses totally.

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Statutory non-profit status. This may seem self-evident, but it bears repeating: Request documentation of their non-profit status. Too many scammers pose as non-profit organizations in order to entice victims. Avoid being one of those people.

Create a list of five to ten not-for-profit debt consolidation companies. Spend the next week contacting each of them and arranging for a consultation to discuss your situation and what they can do to assist you.

A good non-profit organization will spend approximately an hour with you during your session. Be suspicious of any group that wants to accept your money and immediately enroll you in a plan. They DO NOT have your best interests at heart.

Avoid succumbing to temptation

Fortunately, a non-profit debt consolidation company will handle much of the paperwork for you. That means they’ll contact your creditors, negotiate a lower interest rate and work with them to consolidate your debt into a single manageable monthly payment.

Regrettably, that is the easy part. The difficult part is really paying down your debt – and that is entirely up to you.

To accomplish this, you must first overcome the desire to use your credit cards until you are debt-free. You cannot add to your debt if you ever intend to pay it off.

My favorite tip is to immerse your cards in a bowl of water and then place them all in your freezer.

Seriously. Remember our discussion of human willpower? It’s really frail – so frail that occasionally a solution like freezing your cards is necessary to eliminate temptation.

When you truly freeze your credit, you’ll have to chip away at a large block of ice to reclaim it – giving you time to consider whether or not to proceed with the purchase you were about to make.

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Additionally, you can give them to a loved one to keep until you are debt-free.

Confront your debt

It’s beneficial to address your debt head-on. That is the first step toward recovery.

While climbing out of debt might be difficult, the sooner you develop a plan, the better. You’ll be able to improve your credit score, increase your savings, save money on interest, and finally sleep at night. After all, debt may be extremely taxing on the mind.

The good news is that you are not required to accomplish this alone. There is assistance available. You might seek assistance from a non-profit debt consolidation firm. Utilize their credit counseling services to assist you in navigating excessive debt. Conduct a study and identify a non-profit organization to prevent falling victim to scammers.

It’s natural to feel sorry for yourself and postpone dealing with your debt. It’s more difficult to take action and make a difference.

Given that you’re here, it indicates that you’re prepared to put in the effort necessary to dig yourself out of your financial rut, which is wonderful!

How are debt consolidation and debt settlement different?

Debt settlement is another term you’re likely to come across in your search to eliminate your debt. However, what is it?

While both debt settlement and debt consolidation are used to manage personal debt, their approaches are somewhat different.

Debt settlement is a technique for reducing the overall amount owed on a debt. Whereas debt consolidation is concerned with decreasing the number of creditors to whom you owe money.

Debt consolidation is the process of combining many debts into one. Debt settlement is the process through which you request that one or more of your creditors accept less than what you owe.

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If the creditor agrees, you and the creditor can agree on a settlement in the form of a lump sum or installments.

Which one is the most appropriate for you?

This is contingent upon your circumstances and the creditor’s agreement. If you want to simplify your monthly payments and save money on interest, debt consolidation is the way to go.

If you are already behind on payments and finding it difficult to catch up, debt settlement may be a better alternative.

In this situation, if you are already delinquent on payments, you may have difficulty obtaining a debt consolidation loan due to the negative influence on your credit score. Thus, debt settlement is unquestionably something to consider in order to alleviate the strain.

Debt settlement is the natural next step if you’ve exhausted all other choices, have terrible credit, and wish to avoid bankruptcy at all costs.

This may imply a hit to your credit score, but you may have to accept it. Once your bills are settled, you can begin repairing the harm.