How to Consolidate Your Debt

A consolidation loans is a loan, generally taken out by college students upon graduation, which is used to pay off various student loans that you have accumulated during your years as a college student. However, a consolidation loan is not restricted only to student loans. In other words, you can take out a consolidation loan for your regular debts (such as credit card debt).

The effect of a consolidation loan is that upon consolidation you have to pay back only one loan (the consolidated loan) instead of the numerous loans that the graduate took out during college or the various debts that you have as a result of credit cards. Make no mistake, the amount of the debt that you owe does not decrease. The only change that occurs is that you now have to make only one payment instead of several. Additionally, because after you consolidate you have to deal with only one company, your loan payments and interest rate are both lower.

Debt consolidation can offer many great benefits, such as a lower monthly student loan and credit card payments, as the case may be, reduced interest rates, the prevention of being assessed late and over-the-limit fees, and faster debt reduction, to name a few. However, there are also some disadvantages that accompany debt consolidation. In regard to consolidation loans for credit cards, you may have a freeze of your credit using privileges, closed credit accounts, and consolidation fees. Knowing how to weigh the positives against the negatives and becoming completely informed (or as well informed as possible) about consolidation are two important factors you need to consider before making a decision as to whether or not you should consolidate your student loans or your credit card debt.

The easiest way to consolidate your loans, whether they are student loans or credit card debts, is by contacting a debt consolidation company. Keep in mind that there are companies that deal exclusively with student loans and there are companies that deal exclusively with credit card debt. Therefore, make sure that you have contacted the correct company for the product that you need.

Once you have chosen a company, you will have to give the company all of your loan information for the loans that you want to consolidate. Basically, the company will either pay off all of your loans and then you pay back that company at a particular interest rate, or the company will talk to all of your creditors and work out a lower monthly payment that is combined with all of your other monthly payments so that a total lump sum payment is calculated that you pay each month.

That is the gist of what you have to do. Keep in mind that the entire process is relatively simple, but it can be tedious. Therefore, be patient and you will be rewarded.

Beware of Credit Repair Services

It is true that many companies exist that will claim to clean up your credit report for a fee. Some of these companies are less than ethical and some are outright scams. However, there are many legitimate companies that will clean up your credit report for a small fee. Many people believe that all of these credit repair companies are cheats that take your money and do no work to help you out. This is simply untrue. However, if you do not know what you are doing or do not keep tabs on the credit repair company that you may hire, you may be take advantage of, your credit report may not be fixed, or both could occur.

If you have late payments, collection accounts, bankruptcies, or any or all of these things in your credit report, you know that these things lower your credit score (some more than others). If you have these things in your credit report, you may have to hire the services of a professional "credit cleaner" in order to maximize the use of your credit report. For the most part, these companies dispute inaccurate information on your credit report in attempts to remove some of the late payments, collection data, and other negative information that have been compiled in your report. The thing that you have to be most concerned about is that these companies not only behave ethically, but that they also behave legally. Creating a new social security number or a new identity in order to avoid your debt obligations is fraud. Therefore, do not engage in such activity.

Many skeptics argue that everything that these credit repair companies do can be done yourself for less money. This is 100% true, but I do not see how that is relevant. I can make dinner at home for less money than going to a restaurant. However, under the skeptics' logic, I should not go to the restaurant because it will cost more than making dinner at home. The point is, if you use a credit repair company, you are paying for experience and convenience.

Keep in mind that you do not have to use a credit repair company is you do not want. As stated in the above paragraph, you can clean your credit report yourself. However, if you decide that your credit report needs to be repaired, you should analyze your situation and decide which option (paying a company to do it or doing it yourself) is best for you. Either way, if done correctly, the results will be worth the time and money.

Companies that Improve your Credit Report for a Fee

It is true that many companies exist that will claim to clean up your credit report for a fee. Some of these companies are less than ethical and some are outright scams, however, there are many legitimate companies that will clean up your credit report for a small fee. Many people believe that all of these credit repair companies are cheats that take your money and do no work to help you out. This is simply untrue. The company that I used to clean up my credit report definitely did its job, and has helped me raise my credit score over 100 points over the course of one year.

Many skeptics argue that everything that these companies do can be done yourself for less money. This is 100% true, however, I do not see how that is relevant. I can make dinner at home for less money than going to a restaurant. However, under the skeptics logic, I should not go to the restaurant because it will cost more than making dinner at home. The point is, if you use a credit repair company, you are paying for experience and convenience. Of course you can do everything yourself, however, if you pay a company to take care of the problem, this means less work for you and, if the company is reputable and experienced, faster results.

Does this mean that you should use a credit repair company no matter what? No, you should not use one of these companies no matter what. If you decide that your credit report needs to be repaired, you should analyze your situation and decide which option (paying a company to do it or doing it yourself) is best for you. Either way, if done correctly, the results will be worth the time and money.


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