Are you balking under the weight of a gazillion unpaid bills? There are a few things you can still do before throwing in the towel. For instance, debt consolidation can help you gain relief from some bills, although it’s worth mentioning that it might not work for every type of bill. Once you know your options, you will know the debts to which you can apply consolidation, and then it will be easier to manage what is left by sound financial planning and budgeting. This article explains which debts you can consolidate and how to go about it.
- Credit card debt
High-interest credit card debt is one of the easiest debts to consolidate through debt relief programs or by getting a debt consolidation loan. Credit cards attract some of the highest interest rates compared to other forms of debt, which makes them the ideal starting point if you’re looking to begin a consolidation plan. Credit card debt consolidation is intended to considerably reduce your debt by reducing the high interest charge, which reduces the aggregate balance that you owe. Once you have this debt under control, you should practice discipline in your spending to ensure you only spend as much as you can repay to avoid attracting late fees and other charges on your credit cards.
- Unsecured loans
Unsecured loans are debts such as personal loans or payday loans, or any other revolving credit lines which do not require you to pledge collateral like your car, home or other assets before receiving the amount. Like credit card debt, unsecured loans often attract a higher interest rate than secured loans because of the increased lending risk in case a borrower defaults. They are also an ideal candidate for debt consolidation through relief programs or consolidation loans.
By paying off these debts with a consolidation lump sum, you will reduce the future interest that would have been due, even though most lenders have a penalty for early payment. This is however predicated on the terms of your loan, since there are lenders that charge the full interest for the entire life of the loan even if you repay it earlier.
You should examine the terms of all your unsecured loans to find out whether it is possible to reduce your interest charges. Begin with the loans that will make you the biggest savings. For instance, if you take out a loan when you have a good credit score, you’ll get a lower interest rate than you would get if you had a poor credit score. If you have loans that won’t make you interest savings, deal with those last, or consider leaving them out.
- Medical Bills
Medical bills are not your classic form of debt, which is why many people don’t think they fit into the actual debt consolidation meaning that they know. Medical bills are a form of unsecured loan, which makes them appropriate to add to debt relief programs or debt consolidation loans. Medical bills tend to be high, especially if you didn’t have medical insurance. In addition, the later you pay the higher the amount due becomes.
If you have a high hospital bill owing, consider adding it to a consolidation plan. If you work with professional credit counselors, you can be assisted to negotiate down the debt so that it’s less than the principal, interest and late fees put together. Medical bills have an advantage in that hospitals will welcome the chance to receive as much of their owing amount and may be willing to knock off all charges if you pay on time and in full.
- Business loans
Establishing and running a business is no mean feat, which is why it’s not uncommon to see businesses that have fallen through. This also happens for younger businesses which have not yet broken even, which means they have no way to meet all required expenses. These loans are usually unsecured, such as supplier debts, employee salaries and utility bills among others. Normally, the business owner personally guarantees these debts, which means he/she is liable if creditors come calling.
As the business owner, you can enlist the help of a business debt consolidation company to find out which of your debts is eligible to be included in a consolidation plan/program. However, if the business is a registered company and loans or expenses were incurred in the company name, the debts may not be eligible for consolidation. Talk to a professional so that they can guide you in making the best decisions about which debts to consolidate.
- Tax bills and debts
Any outstanding/unpaid taxes owed to a state department or the IRS is not eligible for resolution by debt consolidation. This is because government departments have many methods of reclaiming amounts owed, such as by garnishment of wages and seizure of tax returns among others. In addition, tax amounts are often final, which means that a credit negotiator will not be able to negotiate lower interest charges or settlement amounts like with other lines of credit.
If you are completely unable to meet your outstanding tax obligation, e.g. because of a pay reduction at work, you are better off turning to a tax advisor for guidance on how to proceed to prevent fines or other penalties like imprisonment.
- Student loans
Whether or not you can add your student loans to a debt consolidation plan depends on whether or not they are unsecured. Federal loans are carefully regulated at a reasonable interest rate so that students are able to manage monthly payments. In addition, the government provides a number of helpful measures, such as setting installments according to income and repayment ability. As such, give your student loans a pass when considering debt consolidation.
As stated, debt consolidation loans are suitable for settling all types of unsecured debts. Secured loans such as auto loans or mortgages are not eligible, neither are government credit lines or tax arrears, lawsuit fees or utility bills. Consider the abovementioned tips before applying for debt consolidation. Once you have decided, there are many Las Vegas consolidating companies you can turn to for your desired solution.
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