Debt consolidation plans that are useful

 


Debt consolidation is defined as a process of combining the total loans due to different creditors into a one manageable loan. This term is mostly used when repaying credit card balances and there are a number of advantages associated with the same. In the following lines, we shall talk about debt consolidation and some ideal plans.


The types of loans one can borrow have increased significantly over the past few years, and increased purchasing power in individuals, has made a person borrow multiple loans. There are home loans, vehicle loans, personal loans, credit cards, etc. In order to have a concrete plan for being able to repay all of them, one needs to have available cash on the respective due dates. Though these loans are meant to simplify lives, they can be the ones that affect the most. There are many debt consolidation plans available to people who face economic hardships. These are considered to be a better choice when compared to declaring bankruptcy.


The following are the advantages of the same:


  • Lower rates of interest – The debtors can be convinced into lowering the rate of interest for the total amount and this is a major benefit.
  • A plan that is spread over a longer period, so that one can repay in smaller installments. The payments can also be paid in one go for the total amount.
  • One does not have to pay any late fees or extra charges, which get accrued if the payment due date is missed.
  • The credit rating will improve. Since the process of repayment has not stopped, it will result in a better rating.
  • One will also get support from debt management agency which will act as a mediator between the creditor and the debtor.

There are many forums to achieve such a plan and some of them are as follows:


Loans – A lot of financial institutes offer personal loans to help people get out of this problem. Though the rate of interest is comparatively higher than other options, it is much lower than those of the credit card companies.

Debt settlement – There are specific agencies who work in this area. Once a person gets enrolled in a debt settlement plan, the total outstanding loan amount can be decreased, the interest will be reduced and the late fees removed. However, this needs to be considered as a last resort as there may be many complications arising out of this plan. One’s credit history may also be tarnished if the payments are not made on time.

Debt management plan – This is ideal for all those who wish to come out clear of the web. The features of such a plan are lower interest rates, a single monthly payment, a specific time period to achieve a debt free status (usually up to 5 years) and financial counseling as well.

Balance transfer – This is in the case of credit cards repayment. When a person has several credit cards, the total outstanding balance can be transferred to a single card account in the same or another bank.