What to Know About Debt Consolidation




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If you’re having a hard time with debt, you have most likely heard of debt consolidation. Most however, do not have all the information they need to decide if it is right for them. If you are considering debt consolidation, here’s what you should know:

 

Only Certain Debts Qualify

Secured debts, which are any with collateral such as your home or car, are not eligible for consolidation. Most unsecured debts are though, including student loans.

 

There Are Three Different Types

Debt consolidation is typically a blanket statement used for three different types of debt consolidation strategies: Debt Management Plans, Debt Consolidation Loans, and Debt Settlement.

 

Some Debt Consolidation Programs are Scams

To avoid debt consolidation scams, choose a nonprofit organization that is a member of either the National Foundation for Credit Counseling or Financial Counseling Association of America. Also, steer clear of any organization that requests any funds upfront.

 

There’s a Step Before Starting

Before beginning a debt consolidation program, you will have a credit counseling session. During this session, whether or not you are a good candidate for the program will be determined.

 

It May Be Perceived Negatively

Even though you are paying your debt, lenders may be able to see that you need a third party to do so. This may alarm them. 

 

Debt consolidation can be a great way to pay off your debt, but it is not a cure-all. If you do decide that this is the right option for you, make sure to make all of your payments so that it does not negatively impact your credit.

 

By: Alecia Stanton







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