Discover the True Meaning of Debt Consolidation and How to Perform It Here!
Debt consolidation is the process of combining all your unsecured debt into a single bill and paying for it using one loan. When you owe debt to many creditors, you normally have to fill in multiple checks to pay them monthly. This is hectic and causes you to face the risk of entering incorrect amounts, missing payments or paying late. Debt consolidation solves this problem by allowing you to apply for one loan to pay off all your debt and then service it with single monthly payments. This form of debt payment allows you to take advantage of features, such as lower interest rates, a convenient payment process, protection for your credit score and eventual elimination of your debt. Therefore, the meaning of debt consolidation is combining all your debts, paying them off with one loan and servicing it with single monthly payments.
Methods of performing debt consolidation
There are many ways to perform debt consolidation. The method that you use depends largely on the amount of debt that you owe. These methods include:
1. If you have debt that totals less than $3,000, you can simply get a credit card that has 0% interest. After that, you can transfer all your debt from higher interest credit cards to it.
2. If you have higher levels of debt, you can take out a personal loan and pay off all your other debts.
3. You can get a line of credit or a loan based on your home equity to pay your debt.
4. You can take a second mortgage on your house or even refinance your current mortgage. You can borrow money against your life insurance policy or your retirement savings.
5. You can enroll in a Debt Management Plan.
What is a Debt Management Plan?
Financial gurus indicate that a Debt Management Plan (DMP) is the ideal way to perform debt consolidation. This sort of debt solution is offered by non-profit bodies. The process begins with a counseling session about your credit. In this one, you learn debt consolidation meaning and identify the exact amount of money that you can currently dedicate to debt repayment every month. After that, the non-profit organization arranges lower interest rates for you from your creditors. In addition to that, they convince your creditors to reduce any fees for late payment. These activities contribute to reducing the amount of money that you pay every month to service your loan.
After they have success